The Current State of PPP Loan Forgiveness
The COVID-19 pandemic has significantly affected American businesses, and everyone has felt the impact of this massive pandemic. Fortunately, many companies could get their help through the SBA PPP guarantee. This program allotted billions for encouraging small businesses to stay strong during the pandemic and prosper. In 2022, the PPP is no longer available. However, you can receive forgiveness on your PPP loans with the proper application, effectively making them small business grants.
While the SBA no longer approves loans, loan forgiveness is still available with the proper steps. This article will cover the details of the payback protection program, loan forgiveness, and how you can take advantage of forgiveness to boost your business.
What is the Payback Protection Program (PPP)?
In 2020 the US government passed the Coronavirus Aid Relief and Economic Security (CARES) Act intending to blunt the economic impact of COVID-19. A large part of this package was $349 billion reserved for small businesses to stay afloat during the pandemic. The primary purpose of the payback protection program (PPP) funds is to maintain payroll and overhead costs. These costs include salary, sick leave, healthcare/retirement benefits, and cash tips. Additionally, businesses can allocate funds from the program to take care of additional overheads such as utility bills and maintenance.
The small business administration’s (SBA’s) program began in March 2020 and lasted until May 31, 2021. During that span, businesses received generous terms of 1% interest with a two-to-five year payback period from the SBA with no collateral. However, the most significant advantage of the SBA’s PPP is the loan forgiveness feature. You can apply for loan forgiveness today if you abide by the SBA’s rules. In fact, while you can no longer receive PPP loans, you can still apply for loan forgiveness by August 30, 2022.
What is PPP Loan Forgiveness?
While the competitive interest rates and payback durations are excellent, the best part of the payback protection program is its loan forgiveness. Essentially, as long as you abide by the rules of the PPP, your loan can become a grant without any payback necessary.
With the economic fallout of the COVID-19 pandemic, the US government wanted to protect small businesses and their interests. As part of the massive CARES act, the SBA offered payback protection to thousands of small businesses to help them stay in business no matter what. The PPP essentially allowed small businesses to remain open and maintain their payrolls even if they weren’t making a profit.
Loan forgiveness is not automatic and still requires documentation to prove that the loan was applied where it needed to be: primarily payroll costs. If your business maintained its salary levels from before the pandemic throughout the loan duration, you could be eligible for forgiveness.
What do I need to be Eligible for PPP Loan Forgiveness?
Many small businesses received funding from the SBA PPP in 2021. These funds were essential to maintaining small companies around the united states and bolstering the economy. The most attractive aspect of the PPP is the loan forgiveness program. However, not everyone is eligible for forgiveness. To qualify for forgiveness, your business must have utilized funds from the loan towards payroll and overhead costs for your business. Extraneous uses of funds outside of these purposes will disqualify you from loan forgiveness.
Specifically, to be eligible for loan forgiveness, you’ll need to have:
- Allocated at least 60% of funds towards payroll expenses, including sick leave and Medicare benefits.
- The remaining funds can only have been used for mortgage interest, rent, and utility expenses.
- During a coverage window lasting 8-24 weeks, the funds must be spent.
- You must maintain staff headcount from before COVID-19 layoffs.
These requirements are guidelines; not meeting them does not mean you won’t receive any forgiveness. Your loan forgiveness is calculated on how you used the loan to finance payroll costs and overhead. In short, the more you followed the rules and allocated funds towards maintaining your business, the greater the loan forgiveness.
Additionally, you can apply for more forgiveness if you have paperwork establishing that a lower headcount is not the result of COVID-19-related layoffs. For example, if employees reject re-employment, are fired with cause, resign, or requested restricted hours, they do not apply to the headcount requirements for loan forgiveness.
What Documents are Required to Receive Loan Forgiveness?
Ideally, you want 100% loan forgiveness when applying to the SBA. The more paperwork you have that validates your application for PPP funds to their designated purpose, the closer you’ll be to complete loan forgiveness. When applying, make sure to have the following paperwork:
- Employee payroll reports and tax files
- Retirement and healthcare pay
- Payroll state filings
- Utility, rent, and mortgage during your coverage period
- Your original PPP loan application
When you have all the documents, the final step is to apply to the SBA. Having all the essential documents is crucial to getting complete loan forgiveness for your small business. However, it can be challenging to stay on top of all these documents and get through all the paperwork. Fortunately, you can get the assistance you need today with the right online loan lender.
Apply for Loans Today with BitX Funding
2020 brought a whirlwind of economic activity with the onset of the COVID-19 pandemic. As businesses struggled to stay afloat, the SBA introduced the PPP as part of the CARES Act to aid small businesses when needed. The PPP offered vital funds to help small business owners maintain their payrolls and help their businesses survive.
While loan forgiveness for the payback protection program is ending soon, you can still get additional loans to help your business thrive in the years to come. Small business owners’ most popular loan options are the SBA 7(a) loans, short-term loans, and personal term loans for your business. If you need additional funds to grow your business, BitX Funding can help today.
For more information on small business loans, contact BitX Funding by phone, email, or fill out the form below.