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Applying for PPP Loan Forgiveness? What You Need to Know First

Many small businesses applied for Paycheck Protection Program loans at the onset of COVID-19, but now the question is: “How do I get PPP loan forgiveness?”

When COVID-19 struck, many small businesses applied for Paycheck Protection Program (PPP) loans. But now that we know the pandemic isn’t going away anytime soon, those same businesses are applying for PPP loan forgiveness—and they’re trying to figure out the process on their own.

The good news is that PPP loans can be up to 100% forgivable, but you need to meet certain requirements. So in today’s article, we’re sharing with you what you need to know before you apply for PPP loan forgiveness.

Requirements When Applying for PPP Loan Forgiveness

In order to get your PPP loan forgiven, there are certain requirements you need to meet. First, you must spend your loan money within 24 weeks of receiving the loan or before Dec. 31, whichever comes first. (This is also called the covered period.)

Next, you need to have spent at least 60% of the loan money on payroll costs. Payroll costs include employee salaries and bonuses, employer taxes, and benefits such as employee health insurance, PTO, severance pay, and retirement.

Also keep in mind that no more than 40% of the loan can go toward non-payroll costs like mortgage interest, rent, or utilities. If you do spend more than 40% on such costs, then it may impact how much of your loan will be forgiven.

When to File for PPP Loan Forgiveness

You can file for loan forgiveness as soon as you use up all the loan proceeds. The opportunity to apply for forgiveness is available until the loan’s maturity date. (Don’t apply any later than 10 months after the last day of the covered period.)

Make sure you stay in contact with your lender throughout the process. They’re required to tell you the U.S. Small Business Administration’s (SBA) loan review decisions and, if part of your loan isn’t forgiven, when your first payment is due.

You can read this information from the SBA for more detailed instructions.

How to Report Payroll on PPP Loan Forgiveness

Once you know you meet the requirements, you can reach out to your lender, who can walk you through the application process and may give you the right form to fill out. If they don’t, though, this SBA Fact Sheet can point you in the right direction. Then, you can download the form you need directly from the SBA website.

Be sure to compile all the payroll-related documentation you need for the form. That includes:

  • Bank account statements or payroll service provider reports that show how much you paid your employees

  • Tax forms for the covered period

  • Payment receipts and account statements showing contributions to employee health insurance, retirement plans, etc.

Click here to see the SBA’s full list of all the documents you need to gather.

If you use QuickBooks Online—which we recommend you do—then downloading your payroll documentation is easy!

Simply go to Workers and select the COVID-19 Resources tab. Then, under the PPP section, select Get Payroll Costs Report for PPP Loan Forgiveness. Then click Run Report.

And there you have it!

Still Have Questions About PPP Loan Forgiveness?

We get it—applying for loan forgiveness can be complicated!

If you’d like extra help through this process, we’d be happy to advise you. Click here to set up a time to talk about how we can help your business thrive.


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