If you are a recipient of a PPP loan, you may apply for forgiveness 8 weeks after your lender sent PPP funds. All or part of your loan may be forgiven if you meet certain requirements. The use of the PPP loan proceeds listed below pertain to the forgivable amount of a loan and are not the only allowable uses of a loan. Regulations and guidance from the SBA and the U.S. Department of the Treasury on the PPP are evolving rapidly and the below information may be outdated. Here are some things you should consider:
What’s the best way to use PPP funds to maximize potential loan forgiveness?
- If you can, use loan funds within 8-week period after you receive funds. You don’t have to use all proceeds in the first 8 weeks. However, amounts spent after this 8-week period won’t be forgivable.
- Use 75% or more funds on eligible payroll costs. Eligible payroll costs include compensation for employees whose principal residence is the U.S., including:
- Salary, wages, commissions, or similar compensation
- Additional wages paid to tipped employees, if applicable
- Benefits, allowance for employee separation, insurance premiums, taxes, and retirement
- To the extent an employee earns in excess of $100,000, you may only include a maximum payroll amount of $15,385 per employee in your forgiveness amount determination.
- Use up to 25% of funds on other eligible business costs:
- Business mortgage interest payments on mortgages in effect before February 15, 2020
- Rent payments on leases dated before February 15, 2020
- Utility payments for electricity, gas, water, transportation, telephone, or internet access under service agreements dated before February 15, 2020
What else may impact your forgivable amount?
- Loan forgiveness may be reduced if the average # of FTE employees you employ during the 8-week period is less than the average number of FTE employees per pay period between:
- February 15, 2019 and June 30, 2019, or
- January 1, 2020 and February 29, 2020
- Most borrowers can choose which time period to use for comparison, but seasonal employers must use February 15, 2019 to June 30, 2019. If any FTE reductions made between February 15, 2020 and April 26, 2020 are reversed by June 30th, 2020, your loan forgiveness amount will not be reduced.
- Loan forgiveness may be reduced if you reduce total salary or wages for any employee during 8-week period more than 25% as compared to the most recent full quarter before the 8-week period.
- If reductions made between February 15, 2020 and April 26, 2020 are reversed by June 30, 2020, your loan forgiveness amount will not be reduced. This forgiveness reduction does not apply to reductions associated with employees who had a salary or wages higher than $100,000 in 2019.
- If you received an advance through the EIDL program, it will be deducted from your forgivable amount on a PPP loan.
How do I apply for forgiveness?
- Submit application to your lender. Once you submit, your lender will determine loan forgiveness eligibility within 60 days. Be prepared to provide the following information for 8-week period:
- Payroll tax filings
- State income, payroll, and unemployment insurance filings
- Canceled checks, receipts, transcripts of accounts, or other documents verifying payments on mortgage obligations, payments on covered lease obligations, and utility payments
- Documentation of any advance received under the EIDL Emergency Grant program