PPP Loan Forgiveness - how to prepare
When it comes to PPP Loan Forgiveness, there are 4 points you should wrap your mind around:
Don't rush to file for forgiveness – mistakes or incomplete paperwork will complicate the process and may put your application at risk for rejection.
Organize the necessary documents – if you're unsure of the required steps, now is the time to ask for help, like support from our PPP experts, for example.
File with your bank once everything ticks and ties – we can help with this too!
Wait for the forgiveness approval - The SBA began accepting forgiveness applications on Aug. 10, and each application can take up to 90 days to process.
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Bloomberg Businessweek recently put out an article with an additonal 4 points for business owners to keep in mind about the forgiveness process. Chris Levy, senior vice persident at Pursuit, a community develeopment financial instirution which funded over 7,000 PPP loans, advises:
1. Take a deep breath. Borrowers understandably are eager to complete the forgiveness application and put the PPP loan behind them, says Levy. You can apply for loan forgiveness as soon as your lender starts accepting forgiveness applications. But you should wait because Congress will likely pass legislation that will make the forgiveness process easier, he says, including automatic forgiveness for PPP loans of $150,000 or less.
2. Review the basics. You can get loan forgiveness on what you spend on payroll, rent, and other eligible expenses during the so-called covered period—the 24-week period beginning the day you receive the funds from your PPP loan. The rules have changed significantly as PPP has evolved: The minimum amount that must be spent on payroll is 60% (originally it was 75%). You can spend up to 40% on non-payroll costs such as rent, utilities and mortgage interest. The loan maturity is now five years; it used to be two years.
Once the 24-week period ends, you have 10 months to submit your forgiveness application to your lender, according to this FAQ from the SBA. You don’t need to make any payments until the SBA makes a decision. If only a portion of the loan is forgiven, or if the forgiveness application is denied, the balance due on the loan must be repaid by the borrower on or before the maturity date of the loan.
3. Chew on this scenario. A business owner who received a PPP loan in April could wait until December to apply through their lender for forgiveness. The SBA might not make a determination until February. The borrower would not make any payments during that 10-month period. “The deferment period is essentially undefined and will not be defined until the SBA makes a determination,” says Levy. “It allows borrowers more time.”
4. Keep your cool. “The one thing we’ve found throughout this whole process—the more patience you have, the better the rules get for you,” says Levy. Keep payroll records as you normally do and communicate regularly with your lender, he says. He urges business owners not to drive themselves crazy. The 3508 EZ form simplifies the rules and should work for almost everyone, Levy says. “It’s really made it that much easier for everyone to obtain full forgiveness. The forgiveness documentation is the same documentation that they had to use when they initially applied, he says. “If they got the loan in the first place, they'll be able to get forgiveness.”
Read the entire article by Nick Leiber
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