How to Get Forgiven for a PPP Loan

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Good morning. I’m LA Times business correspondent Samantha Masunaga replacing Rachel Schnalzer to bring you our weekly newsletter. The window for applying for a loan under the Federal Payroll Protection Program, which has become a lifeline for many small businesses during the COVID-19 pandemic. day off monday

Next steps for recipients: Spend money and pay off debt.

Loans are meant to be forgiven, but they don’t happen automatically. Recipients can keep the money for themselves if they can demonstrate that they have used it for a specific purpose and are largely refraining from cutting jobs and paying.

Last week, 3.3 million PPP loans totaling $ 279.4 billion were written off, out of a total of 5.2 million loans issued last year, according to the Small Business Administration. About $ 1 billion in PPP loans have not been forgiven, $ 81.5 billion in loans are pending, and no forgiveness has been received on loans totaling $ 159.1 billion.

Overall, more than 99% of the loan amount was forgiven by those who completed the forgiveness process, according to the SBA.

Here’s an overview of the process and tips on what a small business can do to improve their chances of getting a forgiveness loan.

Who has the right: In order for your loan to be fully forgiven, you must maintain the number of employees and the compensation levels of those employees, and spend at least 60% of the PPP money on payroll. “This includes wages, bonuses and benefits, including employer-paid insurance and sick leave,” said Kelsey Sheehy, a small business expert at financial advisory website NerdWallet.

The remainder of the loan was to be spent on what the SBA defines as eligible costs: Operating costs, mortgage payments, utilities, worker protection, and property damage from last year’s civil unrest that were not covered by insurance.

Loan forgiveness is not all or nothing. Borrowers who have spent most of their PPP money on eligible costs can be forgiven for that portion of their loan, Sheeha said. The rest will have to be given.

When to apply: Borrowers can apply for forgiveness after they have spent all the loan they wish to receive.

Those who received PPP loans in the first round had only eight weeks to use the money. For PPP loans issued after June 5, 2020, borrowers are given six months to spend the money. They do not need to start repaying the loan earlier than 10 months after the end of the spending period.

“Borrowers have a fairly long grace period to apply for loan forgiveness,” Sheehi said.

She advised recipients of PPP loans to apply before they start repaying, although they can apply before the maturity date of the loan.

Collecting records: Borrowers should keep a good record of the expenses they paid with the loan money. Collecting paperwork can be one of the most time-consuming steps in applying for a loan forgiveness, Sheeha said.

Even if the loan amount does not require detailed expense lists, PPP loan recipients must keep receipts and be able to account for every dollar spent in case the SBA requests it later.

“You don’t want to be in a position where in a year … you’ll be climbing,” she said.

Process: Borrowers should work with their PPP loan lender and make sure they have the required forms to complete. According to David Blankenhorn, a mentor based in Orange County, this form will “fairly clearly” state what is required. Score, a not-for-profit network of volunteer small business mentors that partnered with the SBA.

If recipients of the loan have questions, they should contact their lender.

“You need to be crystal clear about how your lender is using the loan forgiveness process,” Sheehy said. “Be in constant contact with your lender so that you know exactly what is expected of you before the deadline begins to draw near.”

Borrowers can also request additional advice and guidance from Score, small business development centers and public financial institutions, she said.

After the borrower fills out the forms and adds any required documentation, the lender will submit a form to the SBA, which determines if the loan qualifies for forgiveness.

According to Blankenhorn, if borrowers fill out the form correctly and have all the expense documentation, the chances of getting a loan forgiveness are “pretty high.”

If the lender completely rejects the loan forgiveness application, the borrower may request that the application be reviewed by the SBA. If the SBA denies an forgiveness, the borrower can apply to SBA Hearings and Appeals Office Within 30 days.

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Do you have questions about work, business or finance during the COVID-19 pandemic, or tips for dealing with them that you would like to share? Send us an email to californiainc@latimes.comand we may include it in a future newsletter.



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