A Guide to Delivering PPP Loans

The Paycheque Protection Program provides fully repayable loans to small businesses struggling with the coronavirus pandemic. But asking for this forgiveness can be daunting, especially for business owners with limited resources.

We’ve put together a guide to help business owners better understand the P3 loan cancellation process.

Requirements for PPP loan forgiveness

The loan forgiveness requirements are the same for the first and second-draw PPP loans. To qualify for full loan forgiveness, you must maintain staffing and compensation levels during the period covered.

In addition, your PPP loan money must be spent on qualifying expenses (see below) during the period covered. For your loan to be fully canceled, at least 60% must be spent on staff costs.

The period covered for most loans made in 2020 is 24 weeks after your loan is disbursed, but borrowers whose loans were issued before June 5, 2020 can opt for the initial eight week period. Business owners with a first or second drawdown loan in 2021 can opt for a covered period of eight to 24 weeks.

Expenses eligible for loan forgiveness

Eligible expenses were originally limited to salary and operating costs, but the coronavirus relief bill passed in December 2020 expanded the list to include supplier costs, expenses related to health improvements and security and some property damage.

The following types of expenses are now eligible for the PPP loan exemption:

  • Payroll costs: This includes all salaries paid, including tips, commissions, and bonuses, as well as employer-paid benefits such as insurance, sick leave, and pension contributions. Compensation for employees earning more than $ 100,000 per year is not eligible for pardon.
  • Operating costs: This includes utilities, business software, rent, mortgage payments, and interest and accounting services.
  • Supplier costs: The cost of goods essential to the operation of your business are eligible for a rebate if the purchase order or contract was in place before the period covered. Perishable food purchase orders placed during the period covered are also eligible.
  • Property damage: These are repairs for damage or loss due to looting, in particular related to public disturbances in 2020. The costs covered by the insurance are not eligible.
  • Protection of workers: This includes personal protective equipment and other costs related to health and safety requirements, such as health examinations, installing barriers or expanding alfresco dining.

Some nuances to note: Expenses incurred before the covered period, but paid during the covered period, are eligible for the rebate. As well as costs incurred during the period covered but paid after its end, provided they are paid no later than the next pay date or regular billing date.

When to request a PPP loan forgiveness

You can request a PPP loan forgiveness as soon as you have spent the funds or as late as when your loan is due. But, ideally, you would do this before having to make a single payment.

Payments on PPP loans are deferred for 10 months after the end of the period covered (eight to 24 weeks). You will need to start repaying your loan if you request forgiveness after this date.

Borrowers are not eligible for the rebate if they apply after the maturity of their loan – two years for loans issued before June 5, 2020 and five years for loans issued after that date.

How to request a PPP loan forgiveness

Contact your PPP lender when you are ready to apply for a pardon. They can direct you to the correct loan forgiveness form. You will need to submit it along with documents showing how you spent your loan. Gathering this paper trail as you go will make it easier to ask for forgiveness. See below for the types of documents you may need to provide.

Documentation required for PPP loan cancellation

In addition to your loan forgiveness request, you will need to provide proof of how you spent your P3 loan. Remember that only funds spent on eligible expenses will be forfeited. And at least 60% of your loan must be spent on staff costs to qualify for a full discount.

Below is a list of documents to submit with your PPP loan forgiveness request. Note: This list is not exhaustive and not all documents will be required for all businesses.

Personnel costs

  • Third Party Payroll Reports.
  • Quarterly national and local financial reports.
  • State unemployment insurance statements.
  • Bank statements
  • Tax documents: Form 1040 Annex C or Annex F, Form 1065 Annex K-1, Form 941, Form 944, Form W-2, Form W-3.
  • Payment receipts, canceled checks or account statements showing employer health and pension contributions.

Other costs

  • Account statements.
  • Utility bills reflecting payments made.
  • Purchase orders, contracts and receipts for supplier payments.
  • Voided checks or receipts for covered expenses, such as business software, protective gear, security modifications, and repairs for damage sustained during summer events.

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Kelsey Sheehy writes for NerdWallet. Email: [email protected]

The article A Guide to PPP Loan Forgiveness originally appeared on NerdWallet.

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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