BBB Business Tip: Navigating PPP Loan Forgiveness

If you are a business owner who received a loan under the Paycheck Protection Program, you may qualify for partial or complete loan forgiveness. But navigating this process can be tricky. Here’s what you need to know as you begin your application.

What is the Paycheck Protection Program?

The Paycheck Protection Program was a key way the United States government helped small businesses weather the COVID-19 shutdowns.  The program, funded under the Small Business Administration (SBA), provided loans to businesses to cover eight weeks of payroll and other costs. PPP was intended to keep businesses viable and allow employees to pay their bills. More than 5 million business were approved for funding under the program, accounting for $525 billion in loans.

PPP loans are forgivable if borrowers devote at least 60% of the proceeds to payroll costs. Even if a business falls short of the threshold, partial forgiveness may be an option.

Here’s what small business owners need to know about loan forgiveness.

Does my business qualify for PPP Loan Forgiveness?

There are a few key points to keep in mind when it comes to qualifying for PPP loan forgiveness:

  • You must have kept all of your full-time employees on payroll – or have rehired them within 24 weeks of receiving your loan.
  • To qualify for complete loan forgiveness, payroll costs must account for 60% or more of the amount forgiven. Conversely, only 40% or less of the amount forgiven may have been used on non-payroll expenses, such as rent and utilities.
  • If you used less than 60% of your loan on payroll costs, you may be eligible for partial forgiveness.
  • If you are self-employed, you can also qualify for PPP loan forgiveness. You are eligible to claim 2.5 months’ worth of your 2019 net profit to replace lost pay. Read more about PPP loans for sole proprietors.

Preparing your PPP Loan forgiveness application

Keep the following tips in mind as you fill out the PPP loan forgiveness application:

  • Get help from a qualified accountant. The PPP loan forgiveness application is complex. If you can afford to do so, it’s a good idea to get assistance from an accountant as you fill out the forms and collect all the necessary documentation. Getting everything right on paper could make the difference between your receiving loan forgiveness or not.
  • Don’t rush to apply. Even though the SBA is now accepting loan forgiveness applications, they continue to issue guidance in a frequently asked questions document. These clarifications could help your business qualify for forgiveness, which is why many accountants believe waiting for further clarifications is the best course of action. For example, on August 11, the SBA clarified that employers’ payments toward certain health care benefits are deemed payroll costs eligible for forgiveness. The deadline for PPP loan forgiveness applications has not been announced yet.
  • Make sure you have all the necessary documentation in order. Even if you don’t plan on turning in an application immediately, it is important to collect and organize all the documentation you’ll need to apply. Guidelines can change quickly, so you need to be ready in case requirements change or a deadline is set. 

For More Information

To learn more about how to apply and qualify for PPP loan forgiveness, see the SBA’s Frequently Asked Questions on PPP Loan Forgiveness document.

As you look for accountants and tax professionals to aid you in the application or repayment process, look to businesses who adhere to the BBB Standards for Trust. Read more about BBB’s Accreditation Standards.

Find an accountant near you or a tax preparer near you in the BBB directory, and pay attention to BBB Accreditation status, ratings, reviews, and complaints.

Learn how to become a BBB Accredited Business.

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Information courtesy of the Better Business Bureau