We are a year into the Covid-19 pandemic, a year into stay-at-home orders and shutdowns – all of which have dramatically affected our businesses. With vaccines becoming more widely available and an additional stimulus package ready to be signed into law, things are hopefully looking up for the health of our families and for our economy. If you received a First Draw PPP Loan to help your business ride out the pandemic during the first wave of approvals, it has been almost 10 months and it’s time to start thinking about applying for loan forgiveness.
First Draw PPP Loans made to eligible borrowers qualify for full loan forgiveness if during the 8 to 24 weeks covered period following the loan disbursement:
-Employee and compensation levels are maintained
-The loan proceeds are spent on payroll costs and other eligible expenses
-At least 60% of proceeds are spent on payroll costs
From the SBA:
How and when to apply for loan forgiveness
A borrower can apply for forgiveness once all loan proceeds for which the borrower is requesting forgiveness have been used. Borrowers can apply for forgiveness any time up to the maturity date of the loan. If borrowers do not apply for forgiveness within 10 months after the last day of the covered period, then PPP loan payments are no longer deferred, and borrowers will begin making loan payments to their PPP lender.
How to start the PPP Loan forgiveness process
If your PPP loan was $150,000 or less, reach out to your PPP Lender first to see if they have their short form forgiveness application ready. Many banks have said that their short form forgiveness applications should be ready any day, if they aren’t already available. We highly recommend that you do not apply for forgiveness until your lender’s simplified application is available, as the processes will be much less complicated. You should reach out to your bank now to get the processes started, so you know what documentation is needed to submit along with your application.
PPP Loans exceeding $150,000 can start the loan forgiveness process now, as they are not eligible to use the short form forgiveness application.
Let us know if you have any questions about the PPP Loan forgiveness process!