Expenses Eligible For Loan Forgiveness
Eligible expenses were originally limited to payroll and operating costs, but the coronavirus relief bill passed in December 2020 expanded the list to include supplier costs, expenses related to health and safety enhancements and some property damage.
The following types of expenses now qualify for PPP loan forgiveness:
Payroll costs: This includes all wages paid, including tips, commissions and bonuses as well employer-paid benefits such as insurance, sick leave and retirement contributions. Compensation for employees earning more than $100,000 per year aren’t eligible for forgiveness.
Operating costs: This includes mortgage payments and interest, rent, utilities and business software, such as accounting, payroll or inventory management programs.
Supplier costs: The cost of goods essential to operating your business is eligible for forgiveness if the purchase order or contract was in place before the covered period. Purchase orders for perishable goods made during the covered period are also eligible.
Property damage: This is for repairs for damage or loss due to looting, specifically related to public disturbances in 2020. Costs covered by insurance aren’t eligible.
Worker protection: This includes personal protective equipment and other costs related to health and safety requirements, such as health screenings, installation of barriers or expansion of outdoor dining.
Learn More About Ppp Loan Forgiveness
These are only a few things to know when wondering what is the deadline for PPP loan forgiveness. But there are many other factors to consider when working with a PPP loan.
Thankfully, were here to help you out so you dont have to figure it all out on your own.
Contact ERC Today for more information about the Employee Retention Credit and any questions you might have about it.
Ppp News: Loan Application Deadline Is June 30 New Forgiveness Documents & Other Updates
PPP Loan Applications Due by June 30, 2020
As discussed in our June 4, 2020, Client Alert on the Paycheck Protection Program Flexibility Act of 2020 , the PPPFA amended several key provisions of the Paycheck Protection Program , but one item that did not change is the application deadline. This means all PPP applications are due by June 30, 2020. Applications must receive a Small Business Administration loan number by June 30, 2020, and any interested applicants should work with their lender prior to this date to ensure submission of the application.
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Proof Of Good Faith And Financial Need Could Include:
- Financial statements showing a significant drop-off in revenue,
- Cancellation of orders,
- Supply chain disruptions that cost you sales, and
- Instructions from a local government authority to curtail your operations for public safety purposes during the pandemic.
- Retain this documentation after you’ve been told your loan is forgiven. The PPP guidance states that you’re still vulnerable to an audit for up to for six years after your loan is forgiven.
Warning: If an audit uncovers impropriety, the borrower may be required to immediately repay the loan, as well as possible civil penalties and prosecution under the False Claims Act.
The most urgent deadline is for companies that received PPP loans prior to June 5, 2020. Those generally were loans with a two-year maturity. Borrowers need to apply for loan forgiveness within 10 months of the last day of the “covered period.”
Ppp Update: Loan Forgiveness Application Deadline Clarified
The Treasury Department and the Small Business Administration have updated the Paycheck Protection Program Loan Forgiveness FAQs to provide clarification regarding the loan forgiveness application deadline.
The CARES Act authorizes the Small Business Administration to make loans to qualified businesses under certain circumstances. The provision established the PPP, which provides up to 24 weeks of cash-flow assistance through 100% federally guaranteed loans to eligible recipients to maintain payroll during the coronavirus pandemic and to cover certain other expenses. The Paycheck Protection Program Flexibility Act made substantial changes to the PPP, including decreasing the percentage that loan proceeds must be used on payroll costs from 75% to 60%, thereby increasing the percentage that may be used for non-payroll costs such as rent, mortgage interest and utilities from 25% to 40%. Additionally, the PPPF Act permits borrowers to defer payments of principal, interest, and fees to 10 months after the last day of the covered period . Prior to the PPPF Act, the deferral period would end after six months. The loan application period closed on August 8, 2020. The SBA began approving PPP forgiveness applications and remitting forgiveness payments to PPP lenders on October 2, 2020.
Loan forgiveness deadline.
FAQs #4 has been updated.
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Report From Government Accountability Office
On June 25, 2020, the Government Accountability Office released its first bimonthly report of its oversight of the Paycheck Protection Program, as required by the Coronavirus Aid, Relief, and Economic Security Act.
The report showed that, while the Small Business Administration had worked quickly to implement the PPP, the urgency caused confusion throughout the implementation of the PPP. Examples of ongoing confusion regarding the PPP included questions about who was eligible to apply for a PPP loan, the release of many unclear interim rules, the frequent release of numerous incomplete answers to questions, and a lack of clarity about how PPP loan proceeds must be used in order to qualify for loan forgiveness. The confusion added to the economic stress that employees were already experiencing from the pandemic.
Some small businesses were concerned that a government agency would later cite them for certifying their need for the loan without good faith. Small businesses were also uncertain whether they would qualify for any loan forgiveness. These uncertainties caused many small businesses to decide to return their loan proceeds rather than face these possible consequences. As of May 31, 2020, businesses had returned more than 170,000 PPP loans, totaling approximately $38.5 billion, largely resulting from many confusing statements and a lack of clarity and confusing information released by the Small Business Administration.
Documentation Needed For Ppp Loan Forgiveness
If your loan was for more than $150,000, you will need to provide proof of how you spent your PPP loan. Only funds spent on allowable expenses will be forgiven and at least 60% of your loan must be spent on payroll costs to qualify for full forgiveness.
Below is a list of documents to submit with your PPP loan forgiveness application. Note: This list isn’t exhaustive, and not all documents will be needed for all businesses.
State and local quarterly financial reports.
State unemployment insurance filings.
Tax documents: Form 1040 Schedule C or Schedule F, Form 1065 Schedule K-1, Form 941, Form 944, Form W-2, Form W-3.
Payment receipts, canceled checks or account statements showing employer health and retirement contributions.
What Is The Ppp Loan Forgiveness Deadline
There is no deadline to apply for PPP loan forgiveness.
Lenders will continue accepting PPP forgiveness applications so long as borrowers have PPP loans. Itâs recommended you apply for forgiveness before you need to make your first PPP loan payment. Hereâs why.
PPP loans have a covered period of 8 to 24 weeks after the funds hit your bank account. Once that covered period ends, your loan payments are deferred for 10 months. Simply put, you donât have to worry about making the first payment for approximately a year after the money hits your bank account.
At the end of the 10 month deferral period, you have to start making monthly payments with loan terms of 1% interest on a two to five year term. Therefore, itâs best to apply for forgiveness before this payment deferral period ends.
What Is Ppp Loan Forgiveness
The Paycheck Protection Program was created at the height of the pandemic to help small businesses survive. Congress empowered the Small Business Administration to issue hundreds of billions of dollars in low-interest small business loans. Since then, nearly $800 billion has been released to 8.5 million small businesses. The PPP loans are forgivable as long as the borrower uses the money for qualified expenses, including keeping staff on their payroll. It also can be used for certain operating expenses and other business costs associated with the pandemic.
Borrowers are welcome to seek loan forgiveness as soon as the proceeds have been used. They can apply anytime up to the loans maturity date, which is 10 months after the loan was issued. For example, businesses who took out PPP loans in January must start repaying in November if they havent been approved for loan forgiveness.
You have up until the loan matures if you are requesting forgiveness, but there is no incentive to wait, Alan Haut, the U.S. Small Business Administrations district director for North Dakota, told business.com. Youll have to start making payments if you apply after the deferment period.
Did you know? The SBA is no longer awarding PPP loans. However, if your business needs financing, you have many other types of loans to choose from.
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Where To Submit The Loan Forgiveness Application
Once every business owner or borrower has understood PPP loan forgiveness when to apply, he needs to know where he can make this application. As per the available information, each lender usually takes the forgiveness applications for the loans through their online portals. It means the borrower must check these portals to check if the lender accepts online forgiveness applications. The borrower can get its notification by email.
The following image is a perfect guide to understanding which PPP forgiveness application form is the best for the borrower –
What Is A Ppp Loan
The Paycheck Protection Program is a $953 billion business loan program launched by the government of the United States to protect small businesses, self-employed workers, non-profit organizations, sole proprietors, and tribal businesses to continue paying their workers and prevent complete closure of the businesses amid coronavirus. It originated from the Coronavirus Aid, Relief, and Economic Security Act 2020.
Here are some major highlights of the Act that summarizes the agenda of the program:
- Open for all small businesses
- Loans that are gotten after June 2, 2020, have a length of five years
- There is no requirement of collateral and personal guarantees
- The amount of the loan approximately equals 2.5 times the applicants average monthly payroll costs.
- The maturity rate of the loan is 2 years while the interest is 1%
- The loan covers expenses of 24 weeks starting from the loan disbursement date
- The loan can be forgiven and essentially turn into a non-taxable grant if the business keeps its employee counts and employee wages stable
- There is no fee for applying for the loan
As for the condition to get the loan forgiven, at least 60% of the loan must be spent on payroll and employee benefits costs, while the remaining 40% can be used on:
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What Is The Covered Period
The covered period is the period in which loan funds must be used to qualify for loan forgiveness. You can choose a covered period of any length between 8-weeks and 24-weeks , beginning on the date you received the loan proceeds.
Funds must be used for eligible costs incurred during the covered period.
Payroll costs for the covered period must be paid or incurred during the period to be eligible. If payroll costs are incurred during the last pay period within the covered period selected, but paid after the end of the covered period selected , these payroll costs will still be eligible for forgiveness.
What Is Best Practice For Ppp Loan Forgiveness
There is no universal best practice for the PPP loan what is best for your business will depend on your situation and outlook. Work with your finance and accounting team to understand your forecast, cash needs, and tax situation, then make an informed decision.
If you do not have a business forecasting process, now is a great time to start. Forecasting is key to any business surviving uncertainty and avoiding unnecessary challenges.
Remember stimulus is no replacement for business strategy. Stay focused on your priorities, keep in communication with your business advisors, and spend most of your effort on business fundamentals and growth initiatives, not PPP forgiveness.
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Filling Out The Ppp Loan Forgiveness Calculation Form
Below are the steps that can be followed to fill the calculation form
Step 1: Provide basic business and loan information
Filling this part of the form will require you following information that you should collect in order to fill the form:
- Your businesss legal name, DBA and trade name, personal social security number, or your business EIN
- Your SBA PPP loan number
- The total number of employees you had when you applied for the PPP loan
- Your business address, primary contact, phone number, and email address
- Your lenders PPP loan number
- EIDL advance amount and application number
- The disbursement date of your PPP loan
Step 2: Confirm your payroll schedule
This section requires you to provide a payroll schedule where you will answer questions such as how frequently do you pay your employee? Was it weekly, biweekly, monthly, twice a month, or other.
Step 3: Determine your covered period
The covered period refers to the eight weeks or 56 days after you receive your PPP loan for spending on payroll and other eligible expenses. As you want to get your loan fully forgiven, you must spend all of the loan amounts during this period.
Step 4: Confirm whether your loan amount was above $2 million
You need to check the box on the application to see if this condition applies to your case.
Step 5: Perform forgiveness amount calculations
Step 6: Certify your forgiveness request
What Is The Deferral Period
Your deferral period ends:
No payment of PPP loan principal, interest, and fees is due during the deferral period.
If you received your promissory note before June 5, 2020, it may indicate that your first payment is due 6 months from the date of the note. The PPP Flexibility Act extended the deferral period, so you can disregard the original 6 month period referenced in the promissory note.
You will receive a loan statement before any payment is due, so you can plan accordingly.
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Experience That Delivers Results
Since March 2020, Aprio has been on the forefront of informing the public about the effective application of CARES ACT provisions like the SBAs Paycheck Protection Program and the Employee Retention Credit .
We continuously monitor the latest guidance from the SBA, Treasury, Congress and the IRS to ensure the latest information drives our strategies.
National media outlets cite our webinars and articles and other accounting firms engage Aprio to advise their clients.
How Do I Submit My Forgiveness Application
If your PPP loan was for $150,000 or less AND your financial institution has opted in , you can apply for forgiveness directly through the Small Business Association . They have created the Direct Forgiveness Portal, which can be accessed here:
For all other loans you will need to follow the process and complete the forms utilized by the bank from which you obtained your PPP Loan. Typically, your financial institution will utilize SBA Form 3508, SBA Form 3508EZ, SBA Form 3508S, or their own equivalent form.
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What Documentation Is Required To Be Submitted With Your Forgiveness Application
Documentation to be submitted depends on the forgiveness application form being submitted and the lender processing the request. Form 3508S, for loans of $150,000 or less, does not require any documentation to be submitted with the forgiveness request although you may be required to support your forgiveness application at some point in the future. Form 3508EZ, for use by borrowers that qualify for certain safe harbors, does not require documentation to support the number of full-time equivalent employees , but does require the following:
- Bank account statements or third-party payroll service reports documenting compensation paid
- Federal and state payroll tax forms overlapping the covered period
- Payment receipts, cancelled checks or account statements documenting health insurance, retirement contributions and eligible non-payroll expenses and
- For non-payroll expenses, copies of invoices or agreements evidencing that the loan, lease or service was in place before February 15, 2020.
When Is The Ppp Loan Forgiveness Application Due
In order to receive forgiveness, a borrowers PPP loan application must be submitted any time before the maturity date of the loan. However, if a borrower does not apply for loan forgiveness within 10 months after the last day of the maximum 24-week covered period , the borrower will need to begin repaying the loan. Once forgiven, any payments made on the loan will be refunded.
Sba Loan Forgiveness For Ppp Eidl Loans
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The Small Business Administrations Paycheck Protection Program doled out $790.9 billion in small-business loans to struggling businesses between April 2020 and May 31, 2021, when the program closed. Nearly $661.5 billion of that loaned amount has been forgiven, as of January 2, 2022.
Keep reading to learn more about PPP loan forgiveness through the SBA, including when and how to apply, and what expenses are covered.