What Happens If Youre Not Approved For Loan Forgiveness
If youre not approved for loan forgiveness, your lender may request additional documentation. Otherwise, you will be required to repay the loan. The outstanding balance will continue to accrue interest at 1% over the loan term. If you decide to repay early, you can do so without incurring any early payment penalties or fees.
Ppp Forgiveness For Partnerships
As a general partner in a partnership, your eligible compensation is based on your partnership 2019 or 2020 net earnings.
The maximum partner compensation is capped at the 2019 or 2020 Schedule K-1 net earnings from self-employment. This amount must be reduced by claimed section 179 expense deduction, unreimbursed partnership expenses, and depletion from oil and gas properties. Once youâve taken these reductions into consideration, multiply the value by 0.9235. This is to remove what would be the employer portion of self-employment taxes.
Further reading:PPP Loans for Partnerships: What You Need to Know
New Ppp Loan Forgiveness Applications Released
The U.S. Small Business Administration , in consultation with Treasury, released Wednesday a revised loan forgiveness application for the Paycheck Protection Program . The SBA also unveiled a new EZ application for forgiveness of PPP loans.
The applications reflect changes to the PPP made by the Paycheck Protection Flexibility Act of 2020, P.L. 116-142, which became law June 5. The applications and instructions are available in the links below:
The releases Wednesday came only hours after the SBA issued a new interim final rule providing guidance on how to calculate employee and owner compensation for loan forgiveness in the new 24-week covered period created by the Paycheck Protection Flexibility Act.
Congress passed the Paycheck Protection Flexibility Act to make it easier for small businesses and other PPP borrowers to qualify for full loan forgiveness. Among the changes in the act are an expansion of the covered period for loan forgiveness to 24 weeks from eight weeks, a reduction of the proportion of proceeds that must be spent on payroll costs to 60% from 75%, and the establishment of a safe harbor for businesses that have been unable to return to the level of business activity they had before the COVID-19 pandemic due to compliance with health and safety guidelines for slowing the spread of the virus.
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Getting Started With The Forgiveness Application
How will the PPP forgiveness process or application work?The Synovus forgiveness process for uploading documentation, providing required certifications, and submitting the application for processing is all online. Once processed and bank approved, the completed 3508 form will be e-mailed from Docusign for your electronic signature and then Synovus will submit the application to the SBA via the portal.
Its important to note the SBA, and not Synovus, sets the criteria for loan forgiveness, including the eligibility criteria and the parameters that determine how much of a loan may be forgiven.
How do I begin my online application? to access our portal or reset your password.
What should I do now to prepare?We encourage you to begin reviewing and gathering materials that may need to be attached to your application, and to review the Schedule A Worksheet if it is needed for your application. Weve listed more information in our FAQs below in the Gathering Information and Required Documents section. Applications must be submitted through our online portal. We will not accept paper applications.
I completed a paper application, what should I do?If youve already completed a paper application, youre well positioned to enter the information into our online application.
When did my covered period begin?Your covered period began on the date your loan funds were provided to you.
Ppp Loan Forgiveness Process
A PPP borrower can apply for loan forgiveness any time on or before the maturity date of the loan, assuming the borrower used all of the loan funds for the specified purposes.
A borrower that does not apply for forgiveness within 10 months after the end of the maximum covered period or some or all of the loan amount is not forgiven must begin paying principal and interest.
Borrowers that apply for forgiveness within the 10-month period, will not be required to make payments and will not accrue interest while a decision is pending, assuming the loan is fully forgiven. Interest continues to accrue on any portion of the loan that is not forgiven.
Any amount not forgiven is due by the loans maturity date.
Forgiveness Process for PPP Loans of $150,000 or Less
The SBA offers an optional, streamlined PPP loan forgiveness process for smaller loans, representing more than 90 percent of all PPP borrowers.
This process is available via a PPP direct forgiveness portal that simplifies PPP loan forgiveness for borrowers with loans of $150,000 or less. Using the portal, qualifying businesses and not-for-profits can register and apply for loan forgiveness directly through the SBA. Importantly, the borrowers lender must also opt in.
Payroll Costs for Employees Residing in the U.S.
Payroll Costs for Independent Contractors and Employees Outside of the U.S.
Utilities
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New Ppp Loan Requirements In 2021
Heres whats new and most important to know about the PPP loan requirements as of the beginning of 2021.
Extension of the covered period. The period covered by a PPP loan extends from August 8, 2020, to March 31, 2021. You can also select PPP loan forgiveness covering a period of either 8 weeks after the loans origination date or 24 weeks after the loans origination date regardless of when the loan was disbursed.
Possibility of getting a PPP loan for the second time. If you have fewer than 300 employees and can document quarterly revenue losses of at least 25% in the first, second, or third quarter of 2020 relative to the same quarter of 2019, you can receive a second-draw PPP loan. The amount of the loan is up to $2 million.
A simpler application form. If your loan is $150,000 or less, you will have a simplified loan forgiveness application process. It includes an application form that is not more than one page in length. You are only required to provide:
- a description of the number of employees the small business owner was able to retain because of the loan,
- the estimated amount of the loan spent on payroll costs,
- and the total loan amount.
How Does Sba Ppp Loan Forgiveness Work
Once you receive and use your PPP funds according to the aforementioned requirements, what can you expect for the loan forgiveness process? Much like the awarding of funds, the Small Business Administration wants to make loan forgiveness as easy and generous a process as possible to facilitate the health of American small businesses. However, the designed incentives need to be met. You will need to prove your compliance with the conditions and requirements of the PPP loans
SBA loan forgiveness will be managed by your SBA-preferred lender. You will submit your PPP forgiveness application to the lender disbursing your PPP funds. Within 60 days the lender will return a loan forgiveness statement which will indicate the loan forgiveness amount and the terms for paying off any funds not eligible for forgiveness. PPP loans before June 5 have a two year term, and loans disbursed after the Flexibility Act will have five year terms.
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Did Your Business Borrow More Than $2 Million Dollars On The Payment Protection Program
For loans of $2 million or more, the Treasury Department is gave businesses until May 18, 2020 to return the funds. This would allow them to avoid an audit concerning the Good Faith Certification. For the businesses that return the funds by May 18, the Treasury will not pursue administrative enforcement. They will also not bother to make referrals to other agencies. In an audit, where the SBA finds that the borrowers certification lacks an adequate basis for needing the loan the Treasury will not pursue administrative enforcement. The is providing the borrower returns the funds after notification by the SBA.
Borrowers that do return the loan proceeds will be eligible for the Employee Retention Credit.
Sole Proprietors Without Payroll Costs
If you arenât running payroll, your PPP loan amount will be calculated using your gross or net income as reported on a 2019 or 2020 Schedule C.
To find your average monthly payroll expense, take your gross income and divide it by 12. Take your average monthly payroll expense and multiply it by 2.5. This will be your PPP loan amount.
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Alternative Payroll Covered Periods
Since the 24-week covered period doesn’t always align with a business’s payroll cycle, the SBA is offering an “alternative payroll covered period” for borrowers with a biweekly or more frequent payroll schedule. As a result, borrowers may calculate eligible payroll costs using the 24-week period that begins on the first day of the pay period after loan disbursement, rather than the first day of disbursement.
Example: If a hair salon received its PPP loan proceeds on Monday, June 8, and the first day of its first pay period following its PPP loan disbursement is Sunday, June 14, the first day of the alternative payroll covered period is June 14 and the last day of the alternative payroll covered period is Sunday, November 29.
Will A Borrowers Loan Forgiveness Amount Be Reduced If The Borrower Reduced The Hours Of An Employee Then Offered To Restore The Reduction In Hours But The Employee Declined The Offer
No. In calculating the loan forgiveness amount, a borrower may exclude any reduction in full-time equivalent employee headcount that is attributable to an individual employee if:
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Ppp Loan Forgiveness Application Deadlines Are Looming
If you were one of the nearly 12 million employers who benefitted from a PPP loan during the height of economic uncertainty brought on by the COVID-19 pandemic, there is a very important upcoming deadline you will want to keep on your radar. If you havent already done so, you should be preparing to apply for PPP loan forgiveness for the 1st draw PPP loan that you received in 2020. It is important to start the process prior to the actual deadline so that you can plan for any unanticipated repayment requirements in case you determine some or all of your loan is not eligible for forgiveness.
What Happens If Im Not Approved For Forgiveness
Your lender may allow you to provide additional documentation so they can reevaluate your request.
Otherwise, your outstanding balance will continue to accrue interest at 1%, for the remainder of the 2 to 5-year period.
There is no prepayment penalty. You can pay off the outstanding balance at any time with no additional fees.
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Why Are Forgiveness Applications Not Widely Available Right Now
When the second stimulus bill rolled out on December 27, 2020, big changes were made to the Paycheck Protection Program. This included:
- A simplified PPP forgiveness application form for loan amounts of $150,000 or less.
- New forgivable expenses such as operational expenses, supplier costs, and property damages related to 2020 riots or public disturbances.
- A second draw PPP loan for businesses needing additional funding.
Both the SBA and lenders need time to update their forgiveness application process to account for these changes.
To 24 Weeks Of Expense Coverage
Expenses eligible for forgiveness are those that are incurred over the 8 to 24 week period, starting from the day you receive your PPP loan from your lender. This is not necessarily the date on which you signed your loan agreement.
You do not need to adjust your payroll schedule. All payroll that your employees incur over the 8 to 24 week period is eligible for forgiveness, even if the actual payout date falls outside the covered period.
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Beware Of Double Dipping On Payroll Expenses
If you have taken advantage of any other COVID-19 employer relief programs , you need to be mindful in calculating your PPP loan forgiveness. In order to prevent Double Dipping from multiple COVID relief programs, employers are not permitted to count payroll expenses for which they received the Employee Retention Tax Credit and/or reimbursement of paid sick leave for eligible employee time off due to COVID-19.
There is an exception if your loan forgiveness application is rejected, then it is not considered Douple Dipping if you then claim any permitted tax credits.
Frequently Asked Questions About Ppp Loan Repayment
The issue date of the loan is the most important consideration for borrowers with questions about PPP loan repayment.
If your business or sole proprietorship received a PPP loan before June 5, 2020, youll most likely need to repay any unforgiven amounts within about two years.
Loans received after June 5, 2020, carry five-year repayment terms.
How Much Interest Do I Owe on Unforgiven Loan Funds?
The interest rate on all PPP loan balances is 1%. Thats $100 in interest payments per year, per $10,000 in unforgiven loan proceeds.
How Long Can I Defer Repayment of Unforgiven Loan Funds?
Under the PPPFA, you can defer repayment of unforgiven loan funds until the SBA pays the loan forgiveness amount to your lender.
If you dont plan to apply for forgiveness, you can defer repayment for up to 10 months after your loans funding date.
How Long Do I Have to Repay My Loan After the Forbearance Period Ends?
If your loan originated before June 5, 2020, you must repay all unforgiven balances within two years of the origination date that is, you have a 24-month maturity date.
If your loan originated on or after June 5, 2020, you have five years from the origination date to repay all unforgiven balances.
Can I Prepay My Loan?
Yes, and notwithstanding the very low interest rate, you should if you can afford to do so. PPP lenders are not permitted to levy prepayment penalties or any other charges for loan payments made ahead of schedule.
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Who Qualifies For A Ppp Loan
Any small business with 500 or fewer employees may be eligible.This includes small businesses, S corporations, C corporations, LLCs, private nonprofits, faith-based organizations, tribal groups and veteran groups. Self-employed individuals who file an IRS Schedule C with their Form 1040, such as independent contractors and sole proprietors, are also eligible.
Throughout the term of the Paycheck Protection Program, there have been complaints about larger companies getting more loans than smaller firms who may really need them. To address this, the Biden administration is proposing a two-week period where only firms with 20 or fewer employees can get the loans. This restriction is scheduled to start on Wednesday, February 24.
Bidens administration is also planning on setting aside $1 billion for businesses with no employees located in low-income areas.
Another change instituted once Joe Biden took office is a plan changing the calculation for self-employed people. Essentially, loans will no longer be based on the profit reported on a businesses taxes. Instead, for sole proprietors, the loan calculation for sole proprietors will be based on the firms gross income, which is expected to expand the pool of eligible businesses and allow some firms to get a bigger loan.
Restaurants and hospitality businesses may qualify if they have 500 or fewer employees per location. Details on the size standards and exceptions are on the SBA website.
Deadline For Ppp Loan Forgiveness
Expenditures and applications for PPP loan forgiveness need to be completed within 10 months of the end of your loan window. If you received your loan before the PPP Flexibility Act in early June you can still use the 8 week window originally designated. We recommend waiting to apply for loan forgiveness until youve been able to restore headcount and pay to acceptable levels for loan forgiveness. After applying for loan forgiveness, you will receive a decision from your SBA-approved lender within 60 days.
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The Ppp Loan Forgiveness Application Process
To get your loan forgiven as a solopreneur, you can visit SBA’s Direct Forgiveness Portal to submit your application . After filling out some basic information, most of your loan information will self-populate on the form, and you’ll sign it using DocuSign. You can submit it right there on the portal and the SBA will begin processing your application. This handy guide can walk you through the process. Note: to use SBA’s portal, your loan had to be less than $150,000.
You can also apply for forgiveness directly with your lender. You’ll need to fill out one of three formsâeither Form 3508S, 3508 or the EZ application. But which form is best for you? Well, of course you would likely prefer the EZ application based on name alone, right?
Wrong.
As it turns out, the EZ application is, ironically, the less easy application . But even so, both are fairly simple.
Form 3508S Forgiveness Application: This form is for people who either:
- Received a loan of $20,833 or less, or
- Received loans bigger than the $20,333 amount, but not more than $150,000. This would occur where, for example, a person is self-employed , but has employees. In that case, they would have applied for a PPP loan that covered their employee payroll as well. Their loans would be substantially more than the self-employed solopreneurâs $20,833.
You can find the SBAâs directions for filling out the application here, but letâs walk through the process:
