A Few Key Facts About Paycheck Protection Program (PPP) Loan Forgiveness
When global economic disasters like the recession of 2008 and the Coronavirus pandemic hit, they disrupt businesses and ruin careers. To overcome the after-effects of such scenarios, governments come forward to devise strategies that can help rebuild the broken economy and lend a helping hand to entrepreneurs.
The Paycheck Protection Program (PPP) is one such strategy coined by the US Federal government’s Coronavirus Aid, Relief, and Economic Security Act (CARES Act).
PPP was created in March 2020 to offer loans to small-scale businesses at only 1% interest to ensure that their expenses can be well managed. Though it sounds beneficial, several businesses find it difficult to apply for it since they have limited funds in hand.
If you too, are facing a similar issue or wish to apply for benefits under this program, do have a look at the information compiled below for full disclosure beforehand.
When is PPP required?
Once you’ve exhausted the funds of your PPP loan, you can apply for forgiveness either immediately or at your loan maturity date.
PPP loan payments can be delayed for 10 months, but after this date, if you apply for loan forgiveness, you’ll have to start making the payments. If you apply for forgiveness after their loan matures, you won’t be qualified for forgiveness.
How can one apply for it?
To apply for PPP loan forgiveness, you should get in touch with your lender as they’ll guide you to the correct application form for it. Along with the application, you’ll need to give in the paperwork describing the expenses where you spent the funds from the loan.
What are the requirements?
The requirements for loan forgiveness are identical for both first and second draw loans:
- Maintenance of compensation and staffing levels
- 60% of the loan should have covered payroll
- Money spent from PPL loan must be legit and eligible (check below)
What are the eligible expenses?
The eligible costs to be mentioned in the paperwork are payroll costs like wages, tips, commissions, benefits/bonus to the staff; operating costs like services, rent, mortgages interests paid, and book-keeping services; supplier costs like business goods bought during the covered period; damage costs (if any); staff personal costs like health and safety needs that were aided with company’s money.
A company can also use this loan to clear other debts that were incurred before opting for PPP. Thus, this expense is also eligible.
What documents are needed?
The main documents that you need to submit as proof include:
- Third-party salary reports
- Bank statements
- State and local quarterly monetary information
- State redundancy insurance report
- Tax statements
- Payment receipts
- Statements of monetary benefits provided to staff
- Amenity/utility invoices
- Purchase orders’ receipts
- Canceled cheques reports
Note: For certain businesses, all these documents aren’t necessary. Moreover, some lenders might need other documents as well. Conduct thorough research on what documents are mandatory to avoid scams.
We hope we’ve covered the basic areas regarding PPP loan forgiveness, and if needed, you can take action appropriately. If your business has been impacted due to COVID-19, PPP loans can prove to be the pillar using which you can restructure your finances.
More in Loans & Credit
Buying Real Estate Without an Agent
Getting a real estate property to your name is one of the major milestones to be achieved once you’re financially stable....January 21, 2021
Serena William Offloads Her South Florida Home in a $2.8 Million Deal
Serena William is hands down one of the best and most successful tennis players in the world. She’s undoubtedly the greatest female...January 15, 2021
Hemsworth Brothers Make a Handsome Profit On Their Malibu Home
Do you know what makes a house beautiful? It’s not the wood, bricks, glass, or décor. It’s the family that resides...January 15, 2021
Trever Noah Pays $27.5 Million for A Japanese-Style Mansion in Los Angeles
Beloved television personality Trevor Noah’s way of ringing into the new year is completely different from any others- and we have to...January 14, 2021
Save Your Small Business from Bankruptcy During the Pandemic with these Smart Moves
The coronavirus pandemic proved to be fatal not only to people but also to numerous businesses. In fact, it didn’t even...January 13, 2021
Rising Renovation Trends for 2021
2020 came with an incredibly unpredictable and difficult-to-swallow shift in daily activities. The outlook of the entire world changed overnight, with...January 11, 2021
Mick Jagger Gifts a $2 Million Mansion to Girlfriend, Melanie Hamrick and Son, Devereaux
Rolling Stones lead singer, Mick Jagger, still got it. One move and the entire entertainment industry busts a move to see...January 11, 2021
Legal Help: Considering Exiting an Abusive Relationship? Here’s What You Need To Know
Family is everything. Our family members are the only ones who accept us despite our faults. But some actions are beyond...January 8, 2021
Financial Advice Experts Say You Should Ignore In 2021
The web is where people can easily share their viewpoints with others from all around the globe. It’s a great way...January 7, 2021