Disclaimer
***Good bookkeeping will be instrumental in getting a loan forgiven. Eligible expenses and documentation during the loan coverage period will be needed.***
How to Apply
There are three different forms for PPP loan forgiveness that vary in their requirements. If you would like to apply, you will fill out one of the forms and submit it to your lender. A response will be provided by the lender within 60 days.
Form 1: Form one is for loan amounts less than $150,000 Paycheck Protection Program: PPP Loan Forgiveness Application Form 3508S Revised January 19, 2021 (sba.gov)
Form 2: Form two is for amounts greater than $150,000. This form is a bit more in-depth and requires some additional information regarding the following. First, the employee annual salary or hourly rate was not reduced by more than 25% in the period being covered by loan forgiveness. Secondly, the total number of employees was not reduced between January 1, 2020 and the end of loan coverage date. Paycheck Protection Program: PPP Loan Forgiveness Application Form 3508EZ Revised January 19, 2021 (sba.gov)
Form 3: Form three is for those who don't fit into the above categories. This is the most rigorous of the forms. Reach out to an accounting professional for help. Paycheck Protection Program: Loan Forgiveness Application Form 3508 Revised January 19, 2021 (sba.gov)
Resource Allocation
The resources received from your PPP loan can be used to fund the following activities.
Payroll (minimum 60% of total)-This includes things like salary, wages, medical, sick leave, health benefits, etc.
Mortgage Interest- Signed before February 15, 2020
Rent- Lease before February 15, 2020
Utilities- Electricity, water bill, gas, sewage, cell phone/landline, and internet
Operations Expenditures- Software or human resource
Supplier Costs- Purchases that are essential to operations made before receiving the PPP loan
Worker Protection Expenditures- Personal equipment or property changes to remain COVID-19 compliant
What You Need to Know
The purpose of the PPP loan is to keep people working. So as a requirement, businesses must meet a set of payroll guidelines in order to be eligible.
-Firstly, a minimum of 60% of your loan is to be used for payroll expenses.
The forgiven loan amount will be proportional to the percentage of loan that is spent on payroll.
-The second requirement to be met is in regards to staffing. The total number of employees must be maintained during the 8 to 24 week period after receiving the loan.
For seasonal employees choose a 12 week period that represents your business.
-The third requirement involves employee pay. This requirement says that 75% of each employee’s total salary/hourly wage must be maintained over the 24 week period.
If for any reason you are denied loan forgiveness the outstanding balance of your loan will incure interest at approx 1% for the rest of the 2 to 5 year period.
Any expenses covered with the PPP loan remain deductible regardless of forgiveness amount.