PPP Loan Forgiveness - What You Need to Know and Do - Wyman Legal Solutions

PPP Loan Forgiveness – What You Need to Know and Do

This past week saw a lot of PPP loan applications approved by the SBA. This means that small businesses will be receiving their PPP loan money in the next ten days. So, what do you need to know and do for this loan to be forgiven? Updated guidance is coming out daily, but here is what you should be doing based upon the information that is presently available:

Updated guidance is coming out daily, but here is what you should be doing based upon the information that is presently available:

KNOW THIS: When evaluating loan forgiveness, your lender will look at the eight (8) week period starting with the day you get your money.

DO THIS: Keep track of your spending during this time. You may want to deposit your PPP money into a separate account to make record keeping easier. Only spend your PPP loan money on forgivable expenses. This includes only payroll costs (including salary, wages, health insurance premiums, retirement benefits), rent payments, interest on mortgages and certain debt, and utility payments.

KNOW THIS: Loan forgiveness may be reduced if you do not spend at least 75% of it on payroll costs. You will have to prove that non-payroll expenses did not exceed 25% of PPP paid expenses.

DO THIS: Keep all documentation that supports or proves how you spent your PPP loan money, such as Bank Statements, Payroll Reports, Lease, Loan Payment Documents, Utility Bills and EIDL documentation (if you received a EIDL “advance” as well). Each lender may have its own additional documentation requirements, so check with your lender.

KNOW THIS: Loan forgiveness may be reduced if you do not maintain the same number of employees and overall payroll that you had on February 15, 2020.

DO THIS: If you let anyone go after February 15, 2020, you have until June 30, 2020 to rehire employees (or hire new employees) to restore both the number of employees and overall payroll to your February 15th level. Your failure to do so will reduce your loan forgiveness amount. But you may not want to rehire someone just for the sake of getting this loan forgiven. Make sure rehiring employees furthers your business plan. Also, the SBA has not given very clear guidance yet on this, so be sure to stay on top of any further issued guidance.

KNOW THIS: You will have ninety (90) days from the end of your 8 weeks to submit a loan forgiveness application to your lender, and your lender will have sixty (60) days to evaluate your forgiveness application.

DO THIS: Expect that you may not know whether and to what amount your loan will actually be forgiven for about six months. The terms of your PPP loan dictate that the money you are borrowing (to the extent not forgiven) must be repaid within two years (at 1% interest per year) and do not require you to make any payments for the first six months.

KNOW THIS: The more disorganized your record keeping is, the more unlikely it will be that your loan will be forgiven.

DO THIS: Contact us to get help with planning and organizing BEFORE you get your money. We can help.