The Paycheck Protection Program (PPP) has been vital for U.S. small businesses that have lost revenue due to the COVID-19 pandemic. Perhaps even more vital is the PPP loan forgiveness program, which exempts eligible businesses from repaying their loan. Under this program, businesses can get their PPP loans forgiven if they meet certain criteria. How much gets forgiven depends on a number of factors, such as how and when the paycheck protection loan is used.
We put together the following post to help you make sense of the latest (and evolving) SBA PPP loan forgiveness requirements, so you can determine your eligibility, apply for, and receive PPP loan forgiveness.
How PPP loan forgiveness works
PPP loan forgiveness requirements differ depending on the size of your business and whether or not you have employees—but, as you’ll see, the guidelines are pretty similar. Here’s how they break down:
Businesses with employees might be eligible for PPP full loan forgiveness if they:
- Rehired staff that was let go during the pandemic (or didn’t end up laying anyone off)
- Reduced salaries by only 25% for employees making less than $100,000 in annual salary
- Used 60% of the total funds towards paying employees and staff
Sole proprietors might be eligible for PPP full loan forgiveness if they:
- Used 60% or more of the loan to cover payroll (or, in the case of sole proprietors, net profit)
- Used no more than 40% on qualifying expenses, like mortgage interest, rent, or utilities.
- Have annualized payroll totals of $100,000 or less
Timing for SBA loan forgiveness
So when does SBA PPP loan forgiveness officially begin? In this section, we highlight everything you need to know right now about loan forgiveness application deadlines, when to apply, what happens if you don’t meet all forgiveness criteria, and more.
When will the SBA accept loan forgiveness applications?
If you have a PPP loan, you’ll have up to 10 months from the end of your covered period to until your payments start. Your “covered period” depends on when you got your PPP loan.
If you received your loan before June 5, 2020, you either have an 8-week or 24-week period to use your funds and remain eligible for forgiveness. If you received your loan after June 5, 2020, you have 24 weeks to do so.
So, your covered period is the 8 or 24 weeks that follow the day of your first loan disbursement. From the end of that period, you’ll have 10 months until your payments start.
Here are a few examples:
|Date of first PPP loan disbursement||Covered period||Last day of covered period||End of repayment deferment|
|May 1, 2020||8 weeks||June 26, 2020||April 26, 2021|
|June 1, 2020||24 weeks||November 16, 2020||September 16, 2021|
|July 1, 220||24 weeks||December 16, 2020||October 16, 2021|
If you want to figure out your own forgiveness application deadline, a days between dates calculator is a good place to start.
The PPP loan forgiveness application is available from the SBA, but as you can see from the above examples, there is no rush in submitting one. If you received your loan from Celtic Bank through BlueVine, this form is digitized so there is no need to download from the SBA. More on that in our next section.
When should I apply for PPP loan forgiveness?
There is plenty of time to apply for PPP loan forgiveness. According to the SBA, you’ll have 10 months from the end of your covered period until your payments start and payments are deferred if you apply for forgiveness.
What’s more, the SBA is still finalizing guidelines for the forgiveness application process and may continue to simplify the process further. If you wait, you’ll have more time to accrue and track eligible expenses, which may help you maximize your loan forgiveness amount. Plus, the final process itself may require less time and/or paperwork on your end.
If you received your loan from Celtic Bank through BlueVine, this process is digitized, and we’ll reach out when it’s the right time to apply.
When will PPP loan repayments happen?
The repayment period itself depends on when you received your loan. According to the SBA, loans issued prior to June 5, 2020 have 2-year repayment terms, while loans issued after June 5, 2020 have 5-year repayment terms.
However, PPP loan repayments won’t begin until Fall 2021, giving businesses more time to recover lost revenue due to the COVID-19 pandemic—and allowing the SBA and PPP lenders to finalize repayment processes. We will continue to monitor PPP loan repayment guidelines and update this post accordingly.
Are any updates planned for the PPP loan forgiveness program?
Legislation is currently under consideration to simplify the PPP loan forgiveness process further. Both the HEALS Act and the Paycheck Protection Small Business Forgiveness Act are calling for loans of $150,000 or less to be automatically forgiven if a business owner submits a simple one-page application.
What if I don’t fulfill all the PPP loan forgiveness requirements?
Fortunately, PPP loan forgiveness is not all-or-nothing. Of course, the more requirements you meet, the higher your forgiveness amount will likely be. But, partial forgiveness will still be granted. Just make sure you’re keeping comprehensive records of your PPP-eligible expenses.
How to prepare for PPP loan forgiveness?
The best way to prepare for PPP loan forgiveness is to track your expenses. Specifically:
- Payroll (including salaries and wages, vacation and extended leave, health benefits)
- Mortgage interest
- Note that your mortgage interest, rent, and utilities expenses will only be considered eligible for forgiveness if you were paying them before February 15, 2020.
Many accountants are advising that business owners open a new bank account specifically for PPP-related expenses. Doing this will save you time in the long run—after all, you won’t have to sort through all of your transactions to separate expenses.
Interested in opening a new account? Check out BlueVine Business Checking, a high-yield online business account with no minimum deposit or balance requirements, no monthly service fees, 1.0% interest, and more.
Is it too late to apply for PPP funding if I need alternative financing options?
The Paycheck Protection Program closed on August 8, 2020, but Congress has been working on a new stimulus package that would include additional PPP support.
Since our founding in 2013, we’ve been dedicated to helping small businesses improve cash flow to grow their businesses. We’re proud to have lent more than $4.5 billion in PPP loans so far this year, helping more than 155,000 small businesses and saving more than 470,000 jobs nationwide—and we stand ready to participate in another PPP.
Learn more about loan forgiveness and getting a PPP from BlueVine.
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