Recent revisions made it possible for more businesses to get in on the federal Covid-relief program, but there is some key information to keep straight.
By Michael Valbrun
Under the Coronavirus Aid, Relief and Economic Security (CARES) Act, the Small Business Administration (SBA) let businesses apply for loans under the Paycheck Protection Program (PPP). Through forgiveness of PPP loans, these businesses could have portions of the loan proceeds used toward eligible costs forgiven in full.
While the applications for PPP loans closed in August 2020, some recent revisions in its provisions allow businesses to apply for a new PPP loan. But applicants wanting to apply for the new loan must do so by March 31.
For existing loans, the program also allows borrowers to apply for loan forgiveness. More than five million loans were issued under the PPP. However, businesses were able to request forgiveness since August.
Firstly, there is the 3508EZ Form, which is available for self-employed individuals with no employees or those who kept their employees count, and salaries and wages at a specified level.
The second form is Form 3508S for loans of $50,000 or less. Form 3508S makes the process less complicated for eligible applicants and is designed for any businesses that don’t qualify in the above categories.
Businesses can get their first draw and second draw PPP loans forgiven. However, during the eight-to-24-week covered period following the loan disbursement, they need to have:
- Maintained employee and compensation levels.
- Spent the loan proceeds on payroll costs and other eligible expenses.
- Spent at least 60% of the proceeds on payroll costs.
For second draw PPP loan forgiveness, they must also ensure that they have maintained employee and compensation levels similar to the requirement for the first draw PPP loan.
Applying for loan forgiveness
Businesses must contact their PPP lender and complete the correct form to get their PPP loan forgiven. As mentioned, they can use one of the three forms to do so. They must also compile their documentation that goes with the forgiveness application. These documents can either relate to payroll or non-payroll expenses.