Stick to Guidelines to Qualify for Loan Forgiveness

Chances are if you’ve recently applied for a Payroll Protection Program (PPP) small business loan, you’ve yet to get a decision on your application or you’ve been told it’s on hold because the lender has run out of funds. Congress is now very close to approving additional funding to revive the program, this time with stricter criteria to help ensure more money gets to more vulnerable small businesses. Hopefully, that means we will see some progress shortly.

Make sure you are fully familiar with the guidelines for how those funds are to be used before you receive them. PPP loans are forgivable up to the full amount of the loan, but the money must be used to pay the specific costs listed in the guidelines. Beginning on the date of the origination of the loan for a period of up to eight weeks, those expenses include payroll costs (per the guidelines and based on the information supplied with the loan application), interest on mortgage obligation, rent or lease payments, and utility payments.

Keep in mind that the primary purpose of the program is to encourage small business owners to keep staff employed and off the unemployment rolls. The amount of loan forgiveness can be reduced if the number of employees or their reported compensation is decreased by 25 percent or more from the documentation supplied with the loan. In other words, if you cut back on salaries or benefits or you lay off or reduce hours for staff you could be liable to pay some of the loan back, with nominal interest. Also, if the money is used to pay any other business expenses not listed, including paying outsourced personnel or services, that portion of the loan will not be forgiven.

In order to comply with the terms for loan forgiveness, you have until June 30 to rehire staff and pay any reduced or back wages. For more information and assistance, check out the U.S. Chamber of Commerce COVID-19 Emergency Loans guide for small businesses.