Editor’s note: Regulations and guidance from the SBA and the U.S. Department of Treasury on the PPP are evolving rapidly. Please refer to the latest guidance from SBA and Treasury to confirm current program rules and how they apply to your particular situation. The information contained in this article only applies to certain small businesses and other eligible organizations. For example, effective April 30, 2020, if you filed a 2019 IRS Form 1040 C, other rules apply.
PPP loans are a cornerstone of the $2 trillion Coronavirus Aid, Relief, and Economic Security (CARES) Act. Small businesses, self-employed individuals, and other eligible businesses and organizations impacted by the coronavirus may find financial relief through the Paycheck Protection Program.
The CARES Act, signed into law in March 2020, originally consisted of $349 billion in aid for small businesses and other eligible businesses to be administered through the Paycheck Protection Program. The government recently authorized an additional $310 billion in government-backed loans. Eligible businesses can apply now through SBA-approved PPP lenders. The U.S. Department of the Treasury recommends potential borrowers submit applications as early as possible.
When can I apply for loan forgiveness?
Following the loan forgiveness covered period after the lender sent the PPP loan funds to the borrower, the borrower can apply for loan forgiveness with their lender. Loan proceeds used to cover eligible expenses within the covered period may be forgiven, in whole or in part, under certain criteria.
For loans made on or after June 5, 2020, your loan forgiveness covered period is 24 weeks. For loans made before June 5, 2020, you can choose to use either an 8-week or 24-week loan forgiveness covered period.
What are loan forgiveness requirements under the PPP?
A PPP loan may be forgiven, in whole or in part, if you use the funds as directed by the SBA and meet certain criteria. For example, at least 60% of the loan forgiveness amount must be attributable to eligible payroll costs.
In addition, your forgiveness amount may be reduced if you do not maintain the same number of employees on the payroll or maintain employee salary levels.
Rehire and restore wages to employees who were laid off between February 15 and April 26, 2020, by December 31, 2020 to avoid any reductions.
Before applying for PPP loan forgiveness, borrowers will need to organize their documentation, including information regarding payroll costs, mortgage interest, rent, utility, and other costs paid within the covered period after the lender sent their PPP loan funds to them.
For more information on loan forgiveness, please refer to the latest guidance from the SBA and Treasury.
If you don’t receive all the relief you need from the Paycheck Protection Program, you may consider other federal and private funding options.
Regulations and guidance from the SBA and the U.S. Department of Treasury on the PPP are evolving rapidly and the above information may be outdated. Please refer to the latest guidance from SBA and Treasury to confirm current program rules and how they apply to your particular situation. The resources described above are made available to businesses within the United States of America.
Given the large demand for additional authorized Paycheck Protection Program funds, not every qualified Paycheck Protection Program applicant will receive a loan.
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