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Paycheck Protection Loan Forgiveness

Paycheck Protection Program

I know this will come as a shock to you. The U.S. Government doesn’t often do anything efficiently. Shock, shock! They are actually starting to make good on their promises to ‘forgive’ Paycheck Protection Program (PPP) loans. Here is some up-to-date information.

After the first round of $349 billion dollars, where the funds ran out in 13 days, and a second round of $321 billion, where despite a website crash early on and a few other disasters, $134 billion of the funds approved by Congress were still ‘unspent’ when they stopped taking applications in August.

Loan Forgiveness

About the same time in August, the Feds began taking applications for the ‘loan forgiveness’ part of the program. At the end of October, businesses began to get positive decisions.

If you want to apply for the loan forgiveness for funds you received from the Paycheck Protection Program, you need to apply to whoever you got your loan from. Your lender has 60 days to review your request and then it is their responsibility to send it on to the SBA. The SBA has up to 90 days to review it. Given the fact that we’re already seeing positive decisions, it isn’t likely to take that amount of time.

Deferments on loan payments were ten months after the last day of between the disbursement of the loan and 24 weeks (about 6 months) later. Anyone who wants to avoid making any loan payments at all needs to apply for loan forgiveness during the deferment period.

People planning to take advantage and apply for loan forgiveness should start now. You’ll need the latest form, 3508S, if your loan was $50,000 or less. (That size loan accounted for about $60 billion in the PPP loans.)

Form 3508S revolves around payroll. To qualify for loan forgiveness, at least 60% of the loan must have used to pay employees. The rest could have been used for other monthly costs like mortgage, interest, rent, and utilities. But before you apply for that and do all that paperwork, look to see if you have enough with just payroll. Many borrowers do.

If your loan was for more than $50,000, you’ll probably need to use the 3508 or the 3508EZ. (The EZ form is mostly for self-employed individuals who have no employees or employers who maintained salaries and headcounts at certain levels.) Check with your lender or CPA to be sure.

Some lenders, like JPMorgan Chase–which made the most Paycheck Protection Program loans by dollar amount–have sent emails to customers let their borrowers know it is time for them to apply—or at least be paying attention to the timeline–for forgiveness if they plan to. Your lender may not do that so do keep in touch with your banker. Those who act early seem to have better things happen when it comes to government aid than those who are slower. Slowing things down may have other negative consequences. It might delay the sale of a business, for example. Or maybe you’re just waiting to list your business for sale because you don’t know how that PPP loan may affect things. It’s time to break down the barriers to whatever you want to do. No need to wait any longer.

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