Legal Guide

A Comprehensive Guide on PPP Loan Forgiveness

PPP borrowers are entitled to loan forgiveness if the funds were used for legal purposes. Specifically for payroll loans, business mortgages, and utility payments.

Fox Rothschild mentioned that the court ordered the release of PPP loan data last December. And it's expected to result in intense scrutiny of the loan forgiveness process for this year. 

Their previous analysis also cited issues on fraud. These include missing information, incorrect data, and companies with several PPP loans.

PPP borrowers need to proceed with caution when filing forgiveness applications.

Agencies are forgiving PPP loans slowly to prevent fraud

Washington Post reported that agencies need to do much more to prevent fraud. These are words from two watchdogs who testified at a House hearing in 2020.

Even before the hearing, the DOJ already charged 57 people trying to steal a total of $175 million.

Since the PPP loan fraud cases are going up, federal governments will be more strict in the coming months. Borrowers applying for loan forgiveness are no exception.

Immediate action is required when facing a DOJ investigation. Work with Miami PPP Loan Fraud Firm for professional protection.

Steps to apply for PPP Forgiveness

If you plan to apply for forgiveness, make sure you're following their process right.

It can be intimidating to apply for a PPP loan forgiveness. But if you get to see its overview, it becomes less overwhelming. 

Here’s a step-by-step guide on how you can apply for PPP loan forgiveness.

  • Contact your PPP lender
  • Compile your documentation and requirements
  • Submit the documentation and forgiveness form to your PPP lender
  • Continue communicating with your PPP lender

PPP loan forgiveness form to use

To request for loan forgiveness, you need to fill out an application form. Your lender will also process it for you. 

You have 3 PPP loan forgiveness options. The Small Business Administration (SBA) made these available for different loan situations.

  • Form 3508S - This is for borrowers who have loan amounts less than $150,000. 
  • Form 3508EZ - This is for borrowers who have loan amounts greater than $150,000.
  • Form 3508 - This is for borrowers who aren’t able to use forms 3508S or 3508EZ. It’s the longest form among the three.

Time frame for PPP loan forgiveness

Your cover period is the timeframe of your loan. Here are the period options for PPP loan forgiveness.

  • 8-week cover period - Your loan gets forgiven faster.
  • 24-week cover period - You have more time to plan.

Not all are free to choose their time frame for PPP loan forgiveness. Borrowers who received their loan after June 5, 2020, are allowed to get covered for 24 weeks only.

Those who received their loan before June 5, 2020, have more freedom. They're allowed to choose between the 8-week or 24-week period.

Expenses eligible for loan forgiveness

You need to provide proof of how you spent your PPP loan.

The PPP Flexibility Act requires borrowers to spend at least 60% on payroll costs. Keep in mind, you need to spend all your funding on forgivable expenses to be eligible. These are:

  • Payroll costs
  • Operating costs
  • Supplier costs
  • Property damage
  • Worker protection

New rules for PPP loan forgiveness

Former President Donald Trump signed the PPP Flexibility Act last June 5, 2020. This brought changes in employer payroll loans. 

The new law modifies several provisions of the PPP loan to make the process easier for borrowers. Most of the changes are related to forgiveness. 

Here are some changes that you need to remember if you’ve already borrowed a loan or if you’re planning to get one.

  • Easier payroll requirements - Before, your payroll expense should be at least 75% to be forgiven. The PPP Flexibility Act changed it to at least 60%
  • Forgiveness period extension - The cover period is now extended from 8 weeks to 24 weeks.
  • Rescheduled rehiring exemptions - Employers were allowed to rehire laid-off employees from February 15 to April 26, 2020. Now, they extended it from June 30 to December 31, 2020.
  • Tax deferral for government employee payroll loans -The PPP Flexibility Act removes the responsibility of having payroll taxes to be immediately due.
  • Program extension - Approved PPP loans after June 5, 2020, will automatically have a loan length of five years. 

When your PPP loan isn't fully forgiven

If your PPP loan isn't forgiven, your lender may allow you to provide more documentation. They can help re-evaluate your request.

But if the lender can't assist you anymore, you will have to repay the amount of the PPP loan that's not forgiven. There will be a 1% interest over a 5-year term.

Keep in mind that there is no prepayment penalty. You can pay off the outstanding balance at any time within the term.

What to do if your forgiveness application is investigated for fraud?

If your loan isn't forgiven, it won't really ruin your business. But if your forgiveness application is investigated for fraud, the situation will call you for a serious course of action.

Remember, the DOJ is prosecuting PPP loan recipients who are accused of both intentional and unintentional PPP fraud. 

If you just got your PPP loan, and you want to be safe from fraud, contact us now! Get the best PPP fraud protection from Miami PPP Loan Fraud Firm. 

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