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PPP Loan Forgiveness: What You Need to Know

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On August 4, 2020, the Small Business Administration (SBA), in consultation with the U.S. Treasury Department, issued new guidance through Frequently Asked Questions (FAQs) aimed at helping Paycheck Protection Program (PPP) borrowers navigate maximum loan forgiveness.

The new PPP FAQs come as the August 8, 2020, deadline to apply for a PPP loan fast approaches, and as Congress and the White House negotiate a new COVID relief package expected to both simplify PPP loan forgiveness and create a new round of PPP loans.

Practically every lobbying group in Washington is urging Congress to allow borrowers of loans under $150,000 to simply self-certify, or “check the box,” they have used the loan money as intended, and allow borrowers to receive a second PPP loan if they can show year-over-year losses in revenue somewhere between 20% and 50%.

Most PPP borrowers are now eligible to apply to have their loans forgiven and, in essence, converted into grants. Borrowers need to apply through their lenders using SBA forms or a lender provided application. The lender will have 60 days to review and approve the application before submitting it to the SBA, which will have 90 days to review it. The SBA may ask the lender or the borrower for additional information before making a determination to forgive all or a portion of the loan.

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The following are the key questions and answers boiled down from the 10 pages of Treasury FAQs:How do I submit my PPP loan forgiveness application?
In an effort to facilitate the process for sole proprietors, independent contractors, or self-employed individuals with no employees, the guidance explains you can use SBA Form 3508EZ or the lender equivalent. While Form 3508EZ is not quite a “check the box” scenario, it is far easier to understand than SBA Form 3508, which would likely require the assistance of a lawyer or CPA. The assumption here is that no employees, other than the owner, were used to calculate the amount of the loan on the front-end application.

The PPP FAQs also clarifies that all PPP lenders may accept scanned copies of signed loan forgiveness applications and documents containing the information and certifications required by SBA forms 3508, 3508EZ, or a lender equivalent. This avoids the need for any in-person meetings between borrowers and lenders.

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