If you’re self-employed — as a sole proprietor or independent contractor with no employees — you can still apply for a Paycheck Protection Program (PPP) loan. If issued after June 5th, 2020, loans are due in five years. No payments would be required until the SBA remits the forgivable amount to your lender or your loan forgiveness application is denied. The SBA form 3508 (. ) We share and discuss the key …, Today’s business environment is becoming more like an all-inclusive resort and less like a place you go just to get …. Such documents may include: Any FTE reductions in these cases do not reduce the Borrower’s loan forgiveness. If you laid off an employee, then offered to rehire the same employee for the same salary or wage and number of hours, but they declined the offer, your loan may still be forgiven for the full amount. PPP Application: At-A-Glance Documents Checklist. As a general guideline, such documents may include: You must also certify that the documents are true. The forms differ in the calculations they require you to do. While the SBA has yet to issue guidance on how the amount of loan forgiveness would be penalized, it’s assumed to be on a dollar-for-dollar basis. Payment receipts, cancelled checks, or account statements documenting the amount of any employer contributions to employee group insurance and retirement plans that you included in your Requested Loan Forgiveness Amount. Get started. As a general guideline, your business may be eligible for full loan forgiveness if you allocate 60% of the loan money to keeping all the full-time equivalent staff on payroll, with no more than 40% allowed for other qualifying business expenses. No payments would be required until the SBA remits the forgivable amount to your lender or your loan forgiveness application is denied. There are so many borrow and pay by the day/week lending platforms that are the equivalent of payday loans. While a separate account is not required by the SBA, your alternative is to keep very meticulous records of all your finances and expenses, and that can be a headache. However, you may still be eligible for partial forgiveness if you do not meet this 60% threshold. Your security matters Safe & Secure. First. What is the Paycheck Protection Program (PPP)? (We’ll continue to update this post to reflect any new rules or guidance.). Sign up. Records Retention Requirement: The Borrower must retain all employment records/payroll documentation in its files for four years and all other documentation for three years after the date the loan forgiveness application is submitted to the lender. However, PPP forgiveness is not automatic. It’s also helpful to remember that the Paycheck Protection Program was passed for the purpose of preserving people’s pay during the primary period of this pandemic. What if you’re unable to meet those criteria? In all of these cases, you’re only allowed to claim this individual if the position was not filled by a new employee. The burden of proof will fall on you. I rarely need it, but it is great to smooth out the cash flow trough caused by a big invoice that is delaying payment. The potential for 100% loan forgiveness is one of the most attractive benefits of the Paycheck Protection Program (PPP). established the PPP to help small businesses maintain their employees and their payroll (or replace their own expected income in the case of, sole proprietors or independent contractors. ) If those employees chose not to come back to work, there are things you can do or even safe harbors that may protect you. As a general guideline, such documents may include: Payroll reports verifying your number of  full-time equivalent employees and pay rates (during both your baseline period and the forgiveness window), Receipts, canceled checks. Finally, ensure that what’s left over is spent only on approved business expenses. How do I update my bank account details? The reasoning is simple: …, Listen to our half-hour discussion on How to Maximize Forgiveness of Your PPP Loan. To maximize your potential loan forgiveness, first make sure you’re not reducing headcount or wages. When will my funds arrive? As part of your PPP loan application process, you should have already calculated your monthly payroll costs according to the guidelines provided for employers. These forms depend on how much you borrowed ($150,000 or less) and whether you reduced employee salaries and headcount. As long as you use the proceeds of the loan under the rules, these loans are 100% forgiven by the government. However, with respect to a PPP loan made on or after December 27, 2020, the deadline for restoring FTEs is the last day of your Covered Period for that PPP loan. A simplified method that assigns a 1.0 for employees who work 40 hours or more per week and 0.5 for employees who work fewer hours may be used at the election of the Borrower. Even if you previously received a PPP loan, the length of this Covered Period is now your choice—at least 8 weeks following the date of loan disbursement and not more than 24 weeks after the date of loan disbursement. Did you have to lay off or furlough employees? of his or her hours. If any portion or all of your PPP loan is not forgiven, the PPP Flexibility Act has extended the deferral period for borrower payments of principal, interest, and fees on all PPP loans to the date that SBA remits the borrower’s loan forgiveness amount to the lender—or, if you do not apply for loan forgiveness, 10 months after the end of your 8- or 24-week loan forgiveness covered period. Once your Covered Period loan forgiveness window has closed, you can submit a forgiveness request to your lender. For each employee, enter the average number of hours paid per week, divide by 40, and round the total to the nearest tenth. Once your Covered Period loan forgiveness window has closed, you can submit a forgiveness request to your lender. There’s even a grace period. Just operate your business like you normally would, and play by the rules. You can apply for the Paycheck Protection Program (PPP) at https://get.fundbox.com/ppp/. Loan payments will be deferred for borrowers who apply for loan forgiveness until SBA remits the borrower’s loan forgiveness amount to the lender. submitted an Application for Canada Student Loan Forgiveness for Family Doctors and Nurses. The PPP offers loans of up to 2.5 times your average monthly payroll costs up to 10 million dollars. Similarly, lenders cannot promise that the government will forgive all or any portion of the loan. in how you spend the funds you have left, including considering “hazard pay” bonuses, giving people promotions and raises, or hiring new employees. However, for PPP loans made on or after December 27, 2020, the deadline for restoring such wages and salaries is the last day of the Covered Period for that PPP loan. Borrowers have to apply to their PPP lender for forgiveness and supply requested documentation. *If you are self-employed, you must have claimed a deduction on your 2019 taxes for expenses indicated with an asterisk above to be forgiven. The SBA has simplified the application process by providing shorter forms if your business qualifies. While forgiveness is not automatic (you have to apply through your PPP lender), the SBA will now provide a simplified one-page forgiveness application if your loan was for less than $150,000. These forgiveness rules are: 60% of the money for payroll costs within a period of 8 weeks or 24 weeks—beginning on the day the PPP funds were deposited in your business bank account. , with no more than 40% allowed for other qualifying business expenses. It’s in your best interest to double-check and have those figures and supporting documents at your fingertips. This content has been prepared for informational purposes only, and is not intended to provide, and should not be relied on for financial, legal or accounting advice. What are commonly used terms and definitions? As the program’s name implies, its intended purpose is to keep employees (and/or owners) paid and employed, with some allowance for operating expenses like the business’ rent, vehicle payments, and utilities. Payroll: Documentation verifying the eligible cash compensation and non-cash benefit payments from the Covered Period, such as: Nonpayroll:  In addition to documentation verifying the existence of your business prior to February 15, 2020, you may also be asked to maintain records of payments for eligible business expenses during your Covered Period, such as: Other Records: All records relating to your PPP loan, including documentation submitted with your PPP loan application, documentation supporting your eligibility certifications (including a gross receipt reduction for a second draw PPP loan, if applicable), and records to support other attestations made during your application or forgiveness process. How much can I get? How Do Fundbox Small Business Loans Work? If you’re trying to use bonuses or raises to get your payroll spending up to the 60% required for full forgiveness, just remember that there is a total cash cap per employee ($100,000 prorated over the number of weeks in your forgiveness period), so gross payroll costs are not to exceed $8,333 per month per worker. The maximum for each employee is capped at 1.0. The PPP is an SBA-guaranteed 1% interest loan up to $2 million that can convert into a grant—as long as you spend the funds according to the rules. Who qualifies for a PPP loan? Halfway through your forgiveness period, take a look at how you’ve spent your PPP funds so far. To qualify for full forgiveness, the remaining loan funds (up to … Security is our top priority. Therefore, your best protection lies in the thoroughness of the documentation you maintain during the loan forgiveness period, as well the documents you provided when applying to your PPP lender. Technically, there is no deadline for forgiveness, according to the SBA. Your number of FTEs at work during your chosen 8 week to 24-week Covered Period, and, Your number of FTEs at work during one of these baseline periods (whichever is, February 15, 2019 to June 30, 2019 (19 weeks), January 1, 2020 to February 29, 2020 (8 weeks). However, amounts not forgiven simply convert into a 1% interest loan, payable over the remaining term of the loan. The deadline to apply for interest-free forgiveness is 10 months after the last day of the Covered Period. Tags: accounting coronavirus COVID COVID-19 loan forgiveness PPP PPP loan SBA Loans Dan Biewener With nearly 20 years of experience in the fields of financial services, online training, and aviation, Dan is currently senior content strategist at Fundbox.com, where he educates and engages with small business owners on alternative solutions for funding, trade credit, and growth. Halfway through your forgiveness period, take a look at how you’ve spent your PPP funds so far. Reputable, affordable, and easy to access. If you run a small business or are self-employed and have already received a PPP loan or are thinking of applying for a first or second draw PPP, here are some things to consider doing to help you get the highest possible amount of your loan forgiven. Any amount of the PPP not forgiven simply remains a 1% loan, payable over the remainder of the loan term. Email Address. There’s even a grace period. Tax forms such as payroll tax filings, State quarterly wage reports, and unemployment insurance tax filings. Rates for the Paycheck Protection Program ("PPP") are at 1%. ©2021 Fundbox, Inc. All rights reserved. Please fill in the details below so that we can track your progress and provide support along the way. Loan agreements identify the issuing lender to small businesses at signing. With nearly 20 years of experience in the fields of financial services, online training, and aviation, Dan is currently senior content strategist at Fundbox.com, where he educates and engages with small business owners on alternative solutions for funding, trade credit, and growth. to at least 75% of the same wage that they earned as of February 15, 2020, you can avoid this wage-reduction penalty. Since you don’t have staff headcount, payroll, and benefits to calculate, your application process (for the loan and later for forgiveness) is much simpler. The Paycheck Protection Program (PPP) is a Small Business Association (SBA) loan that can provide 1% interest loans that are … While a separate account is not required by the SBA, your alternative is to keep very meticulous records of all your finances and expenses, and that can be a headache. If you do this, remember to switch your payroll withdrawal account to your dedicated PPP account for the 24-week period. Once you’re approved by the SBA, the lender has just 10 days to put the money into your account, but usually this happens very quickly. However, thanks to the, Paycheck Protection Program Flexibility Act, Further Consolidated Appropriations Act of 2020. , the PPP forgiveness process is now more streamlined than before—especially for PPP loans of $150,000 or less. , you also have the option of using either date range above, or any consecutive twelve-week period between May 1, 2019 and September 15, 2019. that counts—so you could hire new employees to replace them. If, by December 31, 2020, you restored the employees’ pay to at least 75% of the same wage that they earned as of February 15, 2020, you can avoid this wage-reduction penalty. It may be difficult to flawlessly comply with (let alone document) the forgiveness requirements. ), If there is evidence that you tried to manipulate the program, such as by providing false information, the SBA’s Interim Final Rule warns that you could be subject to additional charges for knowing violations or misappropriations. If you also receive or received an EIDL (Economic Injury Disaster Loan) advance from the SBA, your amount of PPP loan forgiveness will not be reduced by the amount of the EIDL advance. over a “Covered Period” of between 8 weeks and 24 weeks. However, there are certain safe harbors that apply that can exempt you from forgiveness penalties, in such situations as an employee refusing to accept an offered position. Most frequently asked questions. The burden of proof will fall on you. As the program’s name implies, its intended purpose is to keep employees (and/or owners) paid and employed, with some allowance for operating expenses like the business’ rent, vehicle payments, and utilities. PPP Loan Forgiveness Calculation Form. This isn’t as easy as just counting full-time employees; you should also factor in your part-time employees. Fortunately, . Please note that this might not be a comprehensive list and these documents may not be applicable to all borrowers. How do term loans work? for a first or second draw PPP, here are some things to consider doing to help you get the highest possible amount of your loan forgiven. Keep in mind that most online lenders have digitized all forgiveness application forms, so ask your PPP lender how the process begins. Even before your forgiveness period is up, it’s a good idea to prepare by organizing what you’ll need. As long as you rehired all those employees (or an equivalent number) by December 31, 2020, then they will be included in your FTE count for your forgiveness period. This applies to past and future PPP loans. Sign up with Fundbox today and learn how to apply for advancement on unpaid invoices. Numbers 2 and 3 are important because your total loan forgiveness can be diminished if you reduced employee headcount or compensation during your covered forgiveness period. (However, interest will still accrue from the date loan was disbursed. These are: 1) an employee that was “, for cause”, 2) an employee who voluntarily. . Furthermore, the rule states, “If a shareholder, member or partner uses PPP funds for unauthorized purposes, the SBA may have direct recourse against such shareholder, member or partner for the unauthorized use.”, To maximize your forgiveness, the first and most important step is to. Apply for funding and find out if you qualify today. “It’s counterintuitive, but Congress designed this program as a way for small businesses to keep their employees rather than laying them off and putting them on unemployment,”advises Neil Bradley, executive vice president and chief policy officer at the U.S. Chamber of Commerce. PPP loans are made by one or more approved U.S. Small Business Administration (“SBA”) lenders. All records relating to your PPP loan, including documentation submitted with your PPP loan application, documentation supporting your eligibility certifications (including a gross receipt reduction for a second draw PPP loan, if applicable), and records to support other attestations made during your application or forgiveness process. or other records of PPP-approved expenses like rent and utilities, Statements for interest paid for debt obligations. , payable over the remaining term of the loan. Forgiveness is not automatic. If your goal is to maximize forgiveness of the loan, current guidance from the SBA suggests you pay your employees anyway, whether your doors are open or they can work from home or not. Business expenses paid for using PPP funds are now tax deductible. Because a pillar of the PPP is to keep workers paid, your, . Whether you rehire or replace, be sure to pay them. Specifically, if a borrower uses less than 60% of the loan amount for payroll costs during the forgiveness Covered Period, they may continue to be eligible for partial loan forgiveness, according to a. from SBA Administrator Jovita Carranza and Treasury Secretary Steven Mnuchin. Forgot Password? Additionally, Fundbox currently offers PPP loan funding (Paycheck Protection Program). Congress continues to debate legislation that could provide for a more streamlined forgiveness process for PPP loans less than $150,000. . Updated 01-19-21. How do payments work? Keep this in mind if you’re considering adding bonuses such as “hazard pay” to help reach the 60% threshold for forgiveness. As long as you keep a written record of your offer to the employee and a record of their refusal, you can submit these later with your loan forgiveness application. Note that there is a limit to the cash compensation any individual employee can be paid during this forgiveness window ($100,000 prorated over the number of weeks in your Covered Period). The Small Business Administration (SBA) has released a simple one-page forgiveness application for Paycheck Protection Program (PPP) borrowers who obtained loans … , you may be exempt from the FTE headcount rule. However, if your loan was for less than $150,000, the SBA will provide a simplified one-page application process for loan forgiveness. With the passage of the new Act in December, 2020, receipt of an EIDL (Economic Injury Disaster Loan) advance no longer reduces how much loan forgiveness the SBA reimburses your lender. However, if your loan was for less than $150,000, the SBA will provide a simplified one-page application process for loan forgiveness. Chase : According to Chase’s PPP FAQs, applicants will receive an email once the loan application is submitted and an additional email when a loan decision is made. This is a new program offering loans up to $10 million at a 1% interest rate, calculated based on 2.5x your average monthly payroll costs. are simplified documents for eligible employers and solopreneurs. This new PPP round offers qualified businesses with potentially forgivable loans up to $2 million at a 1% interest rate, based on average monthly payroll costs (or for sole proprietors, your average net revenue)—from an equivalent period of 2.5 months (or 3.5 months if in the food service or accommodation industry). If you notice that 60% of your expenses aren’t going towards payroll, or that your average FTE headcount or employee wages are below your thresholds, you may have time to. PPP funds may be forgiven if they make up no more than 40% of your total loan amount and are qualifying expenses related to your business during your chosen covered 8 or 24 week period. Form 3508EZ and Form 3508S are simplified documents for eligible employers and solopreneurs. However, for PPP loans made on or after December 27, 2020, the deadline for restoring such wages and salaries is the last day of the Covered Period for that PPP loan. Other rules must be followed to qualify for maximum forgiveness as well, Clendenning said. Even if you previously received a PPP loan, the length of this Covered Period is now your choice—at least 8 weeks following the date of loan disbursement and not more than 24 weeks after the date of loan disbursement. Don’t take for granted that the SBA will forgive you simply on the assumption that you used the funds appropriately. In the event reductions were made, you have one recourse. If your loan was approved, you’ll get an email with an SBA loan number and the loan amount. We can help you apply. You’ll need to determine your number of full-time equivalent (FTE) employees. Disclaimer: Fundbox and its affiliates do not provide financial, legal or accounting advice. To make it easier to manage, track, and later document your loan’s appropriate usage, some accounting firms recommend that you. How do I apply to Fundbox? Proof of payroll or net income. Paycheck Protection Program (PPP) About the SBA's COVID-19 loans and forgiveness. When that happens, immediately do some math, because you’ll need to know these figures to compare later your spending. following the date of disbursement of the loan. If you miss this deadline, you may have to make payments of principal, interest, and fees on the covered loan, beginning on the day that is not earlier than the date that is 10 months after the last day of your Covered Period. Unforgiven loan payments deferred up to 10 months. Subscribe to Fundbox Forward for expert insights and tips every week so you can grow. Such expenses may include these costs (some of which are new and all apply retroactively to previous PPP loans): Business mortgage interest payments* . Fundbox makes capital available to businesses through business loans and lines of credit made by First Electronic Bank, a Utah chartered Industrial Bank, member FDIC, in addition to invoice-clearing advances, business loans and lines of credit made directly by Fundbox. There are now three forms. The SBA has simplified the application process by providing shorter forms if your business qualifies. You should consult your own PPP lender or your own financial, legal or accounting advisors before engaging in any transaction. Specifically, if a borrower uses less than 60% of the loan amount for payroll costs during the forgiveness Covered Period, they may continue to be eligible for partial loan forgiveness, according to a joint statement from SBA Administrator Jovita Carranza and Treasury Secretary Steven Mnuchin. This rule does not apply to employees who earned an annual salary of $100,000 or more ($8,333 per month) in 2019. We use industry best practice security protocols. Three keys to remember are: 1) follow the PPP’s intent, 2) carefully document, and 3) don’t do anything that makes it look like you’re trying to game the system. Once you’re approved by the SBA, the lender has just 10 days to put the money into your account, but usually this happens very quickly. Download .pdf. For example, for an 8-week Covered Period, the maximum is $15,385, for a 24-week Covered Period, the maximum is $46,154. If you do not request forgiveness, you will not have to make any payments for 10 months following the date of disbursement of the loan. What if you’re unable to meet those criteria? Form 3508 requires the most calculations, Form 3508EZ requires less calculations, and Form 3508S is nearly calculation-free. that let you claim an individual as a FTE even though they are no longer employed with the company on the date of your forgiveness application. First, ask your lender if they will require any specific documentation. If you notice that 60% of your expenses aren’t going towards payroll, or that your average FTE headcount or employee wages are below your thresholds, you may have time to make necessary adjustments in how you spend the funds you have left, including considering “hazard pay” bonuses, giving people promotions and raises, or hiring new employees. Therefore, your best protection lies in the thoroughness of the documentation you maintain during the loan forgiveness period, as well the. Upon approval, they’ll send the loan amount to your bank account. If you miss this deadline, you may have to make payments of principal, interest, and fees on the covered loan, beginning on the day that is not earlier than the date that is 10 months after the last day of your Covered Period. One common question over the headcount issue is: how can you rehire employees if your business is still closed, even as mandated by stay-at-home orders? It’s in your best interest to double-check and have those figures and. “[Congress] anticipated that you might be paying employees who actually physically can’t come to work who aren’t providing services — but they would rather pay you (through the paycheck protection program) to pay those employees rather than you laying them off.”. Effective Jan 19, 2021. In addition to documentation verifying the existence of your business prior to February 15, 2020, you may also be asked to maintain records of payments for eligible business expenses during your Covered Period, such as: Business mortgage interest payments receipts or cancelled checks, Business rent or lease payment agreements, receipts, and/ or cancelled checks verifying eligible payments, Business utility payment invoices and receipts, cancelled checks, or account statements verifying those eligible payments, Covered operations expenditures’ invoices, purchase orders, receipts, cancelled checks, or account statements. Here’s how: Make sure to keep records that show your work on these calculations. It may be difficult to flawlessly comply with (let alone document) the forgiveness requirements. For example: if your loan is for $50,000, you’ll need to pay at least $30,000 to your employees. Furthermore, the rule states, “If a shareholder, member or partner uses PPP funds for unauthorized purposes, the SBA may have direct recourse against such shareholder, member or partner for the unauthorized use.”. In the event reductions were made, you have one recourse. , to avoid the forgiveness penalty for reduction in pay. Form 3508 requires the most calculations, Form 3508EZ requires less calculations, and Form 3508S is nearly calculation-free. Because a pillar of the PPP is to keep workers paid, your loan forgiveness may be reduced if you cut the average wage of any employee by more than 25%. So, for the Covered Period, you need to pay your employees at least 75% of their average wage based on what you paid them in 2019 (or if 2019 data isn’t applicable, based on their gross wages in the first quarter of 2020). The new law also provides some more lenient forgiveness details: Now all business have a choice of an 8-week or 24-week covered period on which to base your forgiveness calculation (including previous PPP loan recipients). To qualify for full forgiveness, the remaining loan funds (up to 40%) must be spent on eligible non-payroll business costs. If you do this, remember to switch your payroll withdrawal account to your dedicated PPP account for the 24-week period. If your goal is to maximize forgiveness of the loan, current guidance from the SBA suggests you. Then we’ll redirect you to our partner, Cross River Bank, to continue with your application. Their FTE hours won’t be counted in your comparative averages, and you may still qualify for loan forgiveness. Covered property damage repair invoices, receipts, cancelled checks, or account statements and documentation that the costs were related to property damage and vandalism or looting due to public disturbances that occurred during 2020 and such costs were not covered by insurance or other compensation. Password Show. If you see you’re going to  come up short in your FTE headcount during your Covered Period, you may still be able to avoid that reduction penalty. Approval and loan forgiveness are subject to your availability to meet government-set eligibility requirements. The official SBA document states that: “Borrowers may submit a loan forgiveness application any time before the maturity date of the loan, which is either two or five years from loan origination. What are the rules for getting the loan forgiven? However, thanks to the Paycheck Protection Program Flexibility Act and the Further Consolidated Appropriations Act of 2020, the PPP forgiveness process is now more streamlined than before—especially for PPP loans of $150,000 or less. Any reduction in an employee’s salary or hourly wages of more than 25% will be subtracted from your eligible loan forgiveness amount. Remember the 60/40 rule. By Office of Capital Access. If you already had a PPP loan and have already exhausted all of those funds, you may also qualify for second PPP loan if you meet these criteria: Your business has fewer than 300 employees You have experienced a reduction of at least 25% in gross receipts during the first, second, third, or fourth quarter in 2020 relative to the same quarter in 2019 includes instructions on calculating the forgiveness amount. What do I need to know about PPP loan forgiveness? Unless you qualify to use the EZ or S versions, you must apply with the regular.