With the implementation of the Paycheck Protection Program (PPP), many businesses have received a direly needed influx of income to use for various expenses. Borrowers would also be pleased to know that they can apply to have their loan forgiven. However, there are various requirements that must be met before a borrower can be granted loan forgiveness. If you are seeking forgiveness for your PPP loan, you should consult with an experienced Roseville CPA for PPP loan forgiveness. At Cook CPA Group, we see how the coronavirus pandemic has caused business owners a seemingly insurmountable amount of issues, and we are here to help you make it through this difficult time. The Cook CPA Group is here to discuss the documentation and requirements needed to successfully apply for PPP loan forgiveness.
PPP Loan Forgiveness Application Documents and Requirements
If you were awarded a loan from the Small Business Administration’s (SBA) Paycheck Protection Program, you should also be aware that the loan can be forgiven. This means that the small business that borrowed the loan will not have to repay the loan to the SBA, which can be a great financial help for businesses that were struggling due to the coronavirus.
The necessary form to file for PPP loan forgiveness can be found on the SBA’s website. This form will require that the applicant collect a large amount of financial data about their company. For example, an applicant for loan forgiveness will need the applicant’s loan number, the amount of the loan, and the date of the disbursement of the loan. The applicant should also document how many employees they had at the time of the loan application and at the time of the forgiveness application.
A small business owner should be aware that there are payroll requirements that must be met to receive loan forgiveness. Specifically, an employer must allocate at least 60% of the loan funds to cover payroll expenses. Before new regulations were passed, the employer was required to use 75% of the funds to cover payroll.
If a small business owner does not use at least 60 percent of loan proceeds on payroll, they will likely be ineligible for full loan forgiveness. Additionally, employers that reduce employee salary by over 25 percent will be required to explain the purpose of the excessive reduction and how the additional money was used.
Loan Forgiveness Application Deadline
Business owners that accepted a PPP loan must file an application for forgiveness within a certain timeframe. A borrower has two options for when they can file their loan forgiveness application. One option is for the borrower to file the loan forgiveness application on the date of the maturity of the loan. A loan matures on the date where the final payment is due.
The other option is for the borrower to file the forgiveness application once they exhaust all the proceeds of the PPP loan before the end of the “covered period.” The covered period is the amount of time provided to borrowers to use the PPP loan funds. If a borrower received their PPP loan before June 5, 2020, they could choose whether they want a covered period of 8 or 24 weeks. All other PPP loans provided after June 5, 2020, will have a covered period of 24 weeks.
Additionally, a borrower should be sure to file their loan forgiveness application within 10 months of the final date of the covered period. If it is not filed within this timeframe, the loan will not be deferred.
There is more information that is required to file your PPP loan forgiveness application. The Cook CPA Group is here to help you initiate your forgiveness application. To learn more about how to qualify for a PPP loan, you should continue reading and contact our experienced team of PPP loan forgiveness accountants.
Qualifying for a PPP Loan
There are some qualifications that must be satisfied before a small business can be awarded a PPP loan. It is important to note that only one of the following qualifications must be met in order to be approved for a PPP loan.
The first qualification is that the business must have 500 or fewer employees. Another qualification is that the company must be classified as a small business in accordance with SBA guidelines; this typically requires an examination of the revenue of the company and the number of employees.
The last qualification is that the tangible net worth of the business must be more than $15 million, and the average net income after federal income taxes cannot exceed $5 million for the prior two fiscal years.
If you are unsure whether your company applies to one of these qualifications, we can help evaluate your options.
Contact Our Experienced California CPAs to File Your PPP Loan Forgiveness Application
If you need the assistance of an accountant to apply for PPP loan forgiveness, speak with an experienced California accountant for PPP loan forgiveness at Cook CPA Group. If you were able to receive a PPP loan to assist your company, you should not hesitate to apply for loan forgiveness that can place you in a greater financial position. Our team of committed accountants are here to get you started on your PPP loan forgives application. To schedule a free consultation to discuss your options for PPP loan forgiveness, contact Cook CPA Group at (916) 432-2218. You may also contact our firm online.