The Paycheck Protection Program (“PPP”), a key component of federal relief efforts during the COVID-19 pandemic, has been utilized by many small businesses to cover payroll and other expenses via low-interest loans. Two rounds of PPP loans were disbursed over the course the pandemic, most recently in March of 2021. As the crisis nears its end, loan recipients should be mindful of the requirements and timeline for loan forgiveness.
Loan recipients have up to ten months after the end of their loan’s “covered period” to apply for forgiveness. “Covered period” refers to the window during which PPP funds could be allocated to eligible expenses to qualify for forgiveness (typically eight or 24 weeks.) If your business received a first draw PPP loan, you are eligible for full forgiveness if, during the “covered period” following loan disbursement:
- employee and compensation levels were maintained,
- loan proceeds were spent on eligible costs and expenses, and
- at least 60% of the proceeds were spent on payroll costs.
If your business received a second draw PPP loan, you are eligible under the same terms provided that your employee and compensation levels were maintained in the same manner as required under your first draw loan.
If you received a loan and are waiting for loan forgiveness, be advised that financial planners are warning that PPP loan forgiveness may take months, if not years, to process through the Small Business Administration (“SBA”) Once your application for forgiveness is received by your lender, the lender has 30 days to review the PPP application. From there, your application will be forwarded to the SBA, at which time the SBA has 90 days to accept or reject the application. If your application is rejected, you are able to appeal, but this starts the review clock over again.
If you have not yet filed for forgiveness, ensure that you follow all aspects of the application process and include the proper documentation. While this cannot guarantee your application will not be flagged by either your lender or the SBA, included detailed information and ensuring you include all information will better provide for a smooth review process.
If your business did not receive a PPP loan, your application window has likely closed. Additional funds were added via federal action in late 2020 and the American Rescue Plan in March 2021, but these funds have been mostly distributed. Community financial institutions hold the remaining money in the PPP loan fund. Community financial institutions can make loans to businesses that are run by women, minorities, and other underserved groups.
If you would like more information regarding PPP loan forgiveness, contact the attorneys at Rock Fusco & Connelly LLC.