How PPP Recipients Can Apply Early for Loan Forgiveness

BY Corrie McGee

The Paycheck Protection Program was responsible for getting over $500 billion to businesses in order to keep themselves above water — including retaining staff, keeping a roof above their head, and their doors open. If you’re one of the small business owners that applied for (and received) a PPP loan, no doubt you’ve already been thinking about the loan repayment details. Don’t worry, we’re going to cover how PPP recipients can apply early for loan forgiveness — and share a few tips on if they should.

There are many small business owners, like you, who are feeling anxious about the PPP loan forgiveness process — which is adding to the general uncertainty of how the economy will fare as we head into the last half of the year.

If you haven’t yet applied, but would like to, congress recently extended the PPP application deadline through August 8th, so that remaining businesses who may not have applied yet can take advantage of the program.

Whether you have received your PPP loan or plan to apply, we have a few insights to help you get a grasp on the PPP loan forgiveness process.

PAYCHECK PROTECTION PROGRAM LOANS

The Paycheck Protection Program has been an historic event with wide-spread effect.

65% borrowed $50,000 or less.
Less than 2% borrowed more than one million.
The average borrower’s monthly payroll was less than $20,000.
$519,505,881,228 was dispersed by 5,458 lenders.
2.4% of loans were canceled by borrowers.
California, New York, and Texas were the top three borrowers.
JP Morgan Chase Bank and Bank of America awarded the largest sums in loans for the PPP.
SBA estimates the PPP saved 51 million jobs nationwide.

These numbers are based on submissions up through July 24th, 2020. Sources: Bank BCLP, U.S. Treasury Department, and Forbes,

The Small Business Association details the Payroll Protection Program Loans as follows:

The loan will be fully forgiven if the funds are used for payroll costs, interest on mortgages, rent, and utilities (due to likely high subscription, at least 60% of the forgiven amount must have been used for payroll).

PPP loans have an interest rate of 1%.
Loans issued prior to June 5 have a maturity of 2 years. Loans issued after June 5 have a maturity of 5 years.
Loan payments will be deferred for six months.

The loan forgiveness process has seen multiple updates, partially due to the initial confusion on submitting the details and proof for forgiveness. Below, we cover the most updated version of full forgiveness for the PPP loans.

HOW PPP RECIPIENTS CAN APPLY EARLY FOR LOAN FORGIVENESS

In June the SBA and Treasury announced newly revised full forgiveness applications for the Paycheck Protection Program.

These are meant to be more borrower-friendly and they take the recently signed PPP Flexibility Act of 2020 into account. When filling out your application, you can work with the original 8-week covered period (if the loan was issued before June 5th, according to the SBA, or you can take advantage of the extended 24-week covered period.

The goal of these updates is to make the process more efficient and easier for you to get the full forgiveness of your PPP loan.

The SBA also created a new EZ version of the forgiveness application. According to the SBA, the EZ version applies to borrowers that:

Are self-employed and have no employees; OR
Did not reduce the salaries or wages of their employees by more than 25%, and did not reduce the number or hours of their employees; OR
Experienced reductions in business activity as a result of health directives related to COVID-19, and did not reduce the salaries or wages of their employees by more than 25%.

The EZ version also requires less documentation for eligible borrowers. (Source: SBA.gov )

EZ PPP Loan Forgiveness Application Form

If the EZ eligibility standards listed above don’t apply to your business, you can use the full forgiveness application linked below.

PPP Full Forgiveness Application

THINGS TO NOTE ABOUT THE PPP LOAN, FORGIVENESS PROCESS, AND ADDITIONAL RELIEF

The Paycheck Protection Small Business Forgiveness Act which, if approved, is meant to streamline the loan forgiveness process. The Act includes forgiving PPP loans of $150,000 or less when the borrower submits a single page, legally-binding attestation form to their lender. You can read more about this proposed bill here.

Some sources recommend considering holding off early applications. It’s important to note that each business needs to work with their specific accountant for the most accurate advice. That being said, The Journal of Accountancy recommends not rushing to apply for forgiveness as the SBA and Treasury still needs to clarify many of the PPP-related issues. Plus, the deadlines have been affected y the five-week extension of the program’s new August 8th deadline.

A second-wave of PPP loans targeted at small businesses could be coming down the pike soon if congress approves it. It would be for businesses with 100 or fewer employees that can demonstrate a revenue loss of or more 50%. This may include relaxing forgiveness requirements. This is called the Prioritized Payroll Protection Program or P4.