PPP Forgiveness

What You Need To Know About PPP Forgiveness

Gather round, everyone! I have some great news from the Federal Government about PPP Forgiveness!  

On October 8th, the Department of Treasury and the Small Business Administration issued an Interim Final Ruling (IFR), greatly simplifying the Payroll Protection Plan loan forgiveness process for businesses that borrowed $50k or less! 

Whew, that’s a mouthful! 

To explain this in more simple terms… business owners who borrowed fifty thousand dollars or less, won’t have to pay that money back. It’ll be like a grant! The whole amount is forgiven. 

In fact, this move affects 68% of all PPP loans issued. That’s AMAZING news for those of you who borrowed 50k or less! As a result, small business owners can rest easy, knowing they won’t have to pay the full amount back.

What You Need To Know About PPP Forgiveness // Lighthouse Business Services

What’s Changed?

Over the past few months, I’ve spoken a lot about the PPP loans. I have a post explaining what the PPP loan is and what the stipulations are. Originally there was a stipulation that you had to have the same number of employees at the same pay rate they were at pre-COVID-19, in order to qualify for loan forgiveness. 

The IFR simplifies loan forgiveness by eliminating both of these stipulations for those who borrowed under fifty-thousand dollars. For those of us who HATE paperwork, this makes the SBA Form 3508S a lot easier to deal with. 

The Borrower’s Responsibilities in PPP Forgiveness

Borrowers will still have to provide documentation and certify that they meet the remaining forgiveness criteria:

  • Funds were spent within 24 weeks of disbursement
  • Loan funds were used on eligible expenses
  • Payroll costs were at least 60% of the forgiveness amount
  • The remaining funds were used on mortgage interest, rent, or utilities  

 The Lender’s Responsibilities in PPP Forgiveness

Under the new IFR, the lender is responsible for:

  • Confirming receipt and data certifications
  • Verifying payroll and non-payroll figures

It is a pleasure to see the Treasury Department and SBA officials making this program easier to navigate for the small business owner! For a change, something was simplified instead of made more complicated! 

Here’s a Breakdown of the Statistics

Here is an interesting breakdown of the PPP available funds vs. funds used. As you may remember, the deadline to submit PPP applications was August 8th. At the end of the application period, here’s where the numbers fall:

  • $660 billion was authorized by Congress
  •  $525 billion in loans disbursed (79.6%) – $62 billion (11%) for $50k or less
  •  $134 billion still remains in the PPP (20.4%) UNSPENT!

After looking at these numbers, I am truly surprised that there was so much left unused for this program!

The Repayment Options

There is additional good news…the Government has added a 10-month deferment period for businesses that do not qualify for 100% forgiveness, so payments must begin 10 months after the loan’s covered period…either 8 or 24 weeks.

Business owners who took out loans for the 8-week period (before June 5th) may extend that to 24 weeks or until December 31, 2020, whichever comes first. If you would like to extend your 8-week loan, don’t assume the extension will be done for you, check with your bank to make certain.

If your loan was disbursed after June 5th, that extension is automatic. As a result, businesses have extra time to spend all PPP funds on authorized expenses. 

Keep Your Records! 

Recordkeeping is key, so continue to keep track of eligible expenses and do yourself a favor by making sure you have good digital copies for the lender’s review. In my opinion, recordkeeping is always key! Always, always, always, cover your behind!

I recommend you scan your statements and proof of payments together and put them in a folder so they are in one place and can be submitted all together if it is required.  Much of this PPP program has been written as we go, so I highly recommend keeping all documentation until the ink dries on this massive program.

Next Steps?

The PPP program has been far from perfect, but there is no denying that it has been a lifesaver for many small businesses. I’m still trying to wrap my head around the fact that $134 billion remains unspent…even by Congress!  That’s astonishing!!!

There is talk about some Congressional members pushing to expand the simplified forgiveness process to cover businesses that borrowed $150k or less. That would be a welcome change for many small business owners and lending institutions.

2020 has been a crazy year. As a result, we’ve learned to expect change! And expect it frequently! You just never know what will be around the corner next! 

Stay tuned, as we navigate the ever-changing saga of the PPP and PPP Forgiveness!

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