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Note: The recently signed PPP Flexibility Act includes changes to the PPP loan program.
Critical planning and documentation now will put your business far ahead when applying for PPP loan forgiveness. The burden falls on business owners to comply with the intended use of the money and to track all monies used. Borrowers must use the funds predominantly (at minimum 60%) for payroll. It’s crucial for borrowers to track and record expenses to apply for forgiveness. If your PPP is through Peoples, expect to turn in receipts, registers, reports, etc., to verify how your PPP funds were used.
HOW DOES THE LOAN FORGIVENESS WORK?
A borrower is eligible to apply for loan forgiveness equal to the amount spent on the following items during the Covered Period* beginning on the date of the origination of the loan:
*Covered Period is either (1) the 24-week (168 day) period beginning on the PPP Loan Disbursement Date, or (2) if the borrower received the PPP loan before June 5, 2020, the borrower may elect to use an 8-week (56 day) Covered Period. In no event may the Covered Period extend beyond December 31, 2020.
Learn more on maximizing forgiveness with these tools:
WHAT IS NEEDED AND WHEN CAN I APPLY FOR LOAN FORGIVENESS?
SBA and Treasury issued a new document that states a borrower may submit a loan forgiveness application at any time on or before the maturity date of the loan, including before the end of the Covered Period if the borrower has used all of the loan proceeds for which the borrower is requesting forgiveness. If the borrower applies for forgiveness before the end of the Covered Period and has reduced any employee’s salary or wages in excess of 25 percent, the borrower must account for the excess salary reduction for the full 8-week or 24-week Covered Period, as required elsewhere in the rules.
If the borrower does not apply for loan forgiveness within 10 months after the last day of the Covered Period, or if the SBA determines the loan is not eligible for forgiveness (in whole or part), the PPP loan is no longer deferred, and the borrower must begin payments. If this occurs the lender must notify the borrower of the date the first payment is due.
Here are the items you'll need to get started on the forgiveness process:
The SBA and Treasury Department have released the PPP Loan Forgiveness Application and instructions. The document informs borrowers how to apply for forgiveness of their PPP loans, consistent with the CARES Act. The form and instructions include:
The SBA has provided a new EZ Form and instructions for some PPP borrowers to use. The qualifications for using the new EZ Form is based on meeting one of these criteria:
Loan size is not a consideration in determining whether you qualify for the EZ Form.
Please watch for future updates as we expect to receive more specific Information from the SBA for borrowers on completing the application.
WHAT COULD CAUSE A LESSER AMOUNT TO BE FORGIVEN?
PPP Loan Forgiveness Application
PPP Forgiveness Guide
Qualifying Payment Documentation Spreadsheet
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