On March 27th, 2020, the U.S. Congress approved a relief bill, better known as the CARES Act. This created the Paycheck Protection Program (PPP) that provides for forgivable loans to Small Business Administrations (SBAs), to enable them to pay their employees during the COVID-19 pandemic.
PPP loans are meant to address the SBAs financial concerns by providing eight weeks’ worth of cash to cover rent, utilities, payroll, and mortgage interest.
To cater to the SBA uncertainties regarding certain PPP restrictions, Congress passed another program, the Paycheck Protection Program Flexibility Act of 2020. The President signed it into law on June 5th. All small businesses must learn and understand the PPP loan forgiveness guidelines to meet its requirements.
Recipients of PPP loans totaling $50,000 or less can apply for forgiveness under the PPP loan forgiveness rules using a simplified application released by the Treasury and the United States SBA. The new Interim Final Rule (IFR) would provide all businesses with new guidance on loan forgiveness and the review process for PPP loan forgiveness guidelines.
Under the IFR, a new application form, borrowers would use form SBA Form 3508S to apply for forgiveness on PPP loans provided the total loan amount was $50,000 or less.
PPP borrowers of loans amounting to $50,000 or less would be exempted from any reductions in forgiveness provided they used the loans to:
Of the 5.2 million loans approved by the SBA, over 3.57 million were $50,000 or less. These loans account for over $62 billion of the total $525 billion in PPP loans.
For a business to qualify for the SBA Form 3508S, it must meet all PPP loan forgiveness requirements and fill out the following loan details:
Borrowers must also certify that they meet all the PPP loan forgiveness requirements to qualify for the loan forgiveness program.
Provided you abide by the SBA’s PPP loan forgiveness requirements, you will be eligible to fill out a loan forgiveness application. All businesses must then submit their applications to the financial institution where they received their PPP loans.
Small businesses that qualify for forgiveness can seek advice from business tax professionals in filling out SBA Form 3508S before submitting it to their lenders on approval. Form 3508S requires less documentation and fewer calculations than the standard loan application process. But the SBA may request documents and other information to review these calculations as part of the loan review process. You can find more information about the application filing instructions of Form 3508S on the SBA’s website.
The SBA has released an extensive frequently asked questions document about PPP loan forgiveness. The FAQ document outlines all the specific use cases of the loan and where forgiveness applies, including what compensations count as payroll costs, how to calculate the total amount to be forgiven, and what costs are eligible for loan forgiveness.
For perceptive businesses, it would be a smart move to get in touch with the relevant business tax services and financial advisors in Clearwater, Florida, to review all your PPP loan details before submitting your forgiveness application.
Choose your local CPA firm in Clearwater to help prepare your business for the PPP loan forgiveness process. We support fellow businesses throughout Clearwater, Florida, to boost SBAs. BAAP CPA is proud to actively provide SBAs with the PPP loan forgiveness guidelines to keep your business afloat.
Supporting new and existing businesses in Clearwater amidst the Covid-19 pandemic is our top priority. Reach out to our business advisory services in Clearwater to guide you through the loan forgiveness process. Contact BAAP CPA today for guidelines on PPP loan forgiveness and business tax services.