You got that cash … now it’s time to keep that cash!
Great news for PPP recipients in 2021. The SBA made it a lot quicker and easier to apply for Forgiveness! For my part, it took only about 10 minutes … once I found the right location on my bank’s portal. (Full disclosure, I did spend about 30 minutes doing the wrong things first….)
Important - this blog post is for you, if you are a 1st time borrower, with under $150K in a loan.
The Basic Process ...
First, the process depends on the bank. Usually, it's two steps - the bank will give preliminary approval, then send to the SBA for final approval.*
In most cases, we just need to get form 3508S - the Simplified Forgiveness Application - to the SBA ... Either the bank will ask you to fill out the form, OR, they will ask you for information and create the form.
In many cases, No supporting documents are required!
The bank will review your application. If satisfied, they submit to the SBA.
It's possible that the bank or the SBA may come back to you to ask for documentation.
Once approved, you'll be notified. And, the SBA sends the money to the bank to pay off your loan.
*It's possible you may be able to apply directly with the SBA - they have opened a Direct Forgiveness Portal just this week - though it is in the Pilot phase. Click here to see it.
This is what you’re going for … to see this sent to you:
Important Info
It is required for us to keep our paperwork for 6 years. This includes the SBA loan paperwork that grants Forgiveness. And, records to show that you used the funds for 60 - 100% for Payroll. See this blog post for more info on records and acceptable uses for the funds.
The deadline for applying for Forgiveness ... is within 16 months after you received the funding.
If you are a 2nd time borrower
You have an extra requirement - you must prove that you had a 25% reduction between 2019 and 2020 (by comparing 2 quarters).
Please talk to your bank to learn what they will need.
Things to Do
Check with your bank / credit union to see if they are open for Forgiveness Applications. In many cases, they will send you an email to invite you to apply.
Click on the link to see the Simplified Forgiveness Application (3508S) - to warm yourself up for the process. You will see that the info needed is pretty basic.
Put time on your calendar to do this work.
Tips
Reach out to any friends with a PPP at the same bank. Learn from them, or go through the process together.
Plan a large chunk of time for this - even if it's quick. It takes a mental toll, so it's nice to have space.
Have something sugary at the start of this session - glucose helps the brain.
If possible, plan a massage, or trip to Olympus, or a bath, or a walk afterward to reward yourself.
Totally intimidated? Call your bank and ask how to get help.
FAQs
What was I allowed to spend the money on? (What do I need to prove about how I used the money?)
You must use 60-100% of the PPP money for "payroll" costs to be forgiven. There are a few other approved costs - such as benefits, rent, utilities, operational - that can be used for up to 40%. Ask your bank.
Am I allowed to use it to pay taxes?
If you are a sole prop or single member LLC ... technically, you, as a person pay taxes (not your business). So, after you give yourself a Paycheck (into your personal account), you can send in IRS estimated taxes from those monies. Having said that, you may NOT use them for city or state taxes - those are taxes your business pays.
I work by myself, I thought Self-Employed people didn't get Paychecks or have Payroll.
You are absolutely correct! Technically, we have profit or an owner draw. Having said that, the PPP Loan is including us, and equating our "profit" with our "payroll".
What happens if it’s not forgiven?
It stays a loan with a 1% interest rate. I think you may also defer payments, but am not totally sure about that yet.
You got this! Wishing you an easy and quick forgiveness.
♥ Jenny Girl Friday
P.S. Are you self-employed? Be sure you’re getting Sidekick Service emails - tax + license reminders sent to your inbox monthly, with links to how-to articles and tools to make things easier and fun.