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Can I Still Qualify for a PPP Loan? PPP Loan Forgiveness and Repayment

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  • The Paycheck Protection Program (PPP) was a COVID-19 relief program that aimed to help small businesses survive the pandemic.
  • Many PPP borrowers may be unaware that they are still eligible for loan forgiveness.
  • Obtaining PPP loan forgiveness is a detailed, time-sensitive process, and the first key step is knowing when to apply.

The Paycheck Protection Program (PPP) was a Coronavirus/COVID-19 relief program designed to help small businesses cover payroll and other eligible expenses during the pandemic.

The PPP program stopped accepting new applications on May 31, 2021. However, many PPP borrowers are eligible for loan forgiveness, provided they meet certain requirements.

What was the PPP and how did the program work?

The PPP offered loans to small businesses and certain self-employed individuals in an effort to keep employees on payroll during the COVID-19 pandemic. The program was implemented by the U.S. Small Business Administration (SBA). Each PPP loan was intended to cover an eight- to 24-week period after the date it was issued, and principal and interest payments were deferred for 10 months after the last day of the covered period.

PPP loan recipients were expected to use most of their funds to cover payroll costs. However, the SBA also authorized the use of some PPP funds for other pandemic-related costs including:

  • Worker protection costs
  • Business mortgage interest, rent and utilities
  • Uninsured property damage
  • Certain operations expenditures
  • Certain supplier costs

PPP loan forgiveness: Who is eligible?

If you received a PPP loan, you may be eligible for loan forgiveness, even if you are self-employed. To qualify for PPP loan forgiveness, the SBA requires that during each loan's eight- to 24-week coverage period:

  • Employees continued to be compensated at their usual rate of pay
  • At least 60% of the loan went toward payroll costs
  • Any remaining loan proceeds were used on other eligible business expenses

How to apply for PPP loan forgiveness

Obtaining PPP loan forgiveness is a detailed, time-sensitive process. The first step is knowing when to apply.

  1. Apply before your PPP loan's maturity date
    The deadline for loan forgiveness varies based on when you applied for and received your loan. Borrowers should apply for PPP loan forgiveness after all of the funds have been used and before the maturity date. Borrowers who don't apply for forgiveness within the 10-month deferral period, will need to begin making principal and interest payments to their lender, even if they later qualify for forgiveness.
  2. Determine whether your PPP lender offers direct forgiveness via the SBA
    Businesses whose loan totaled $150,000 or less may be able to apply for forgiveness directly to the SBA. If your PPP lender is on the SBA's direct forgiveness list, then you may apply for loan forgiveness through SBA's online portal. However, if your PPP lender is not listed, then you must apply through your individual lender for forgiveness.
  3. Gather your receipts and documentation
    Before submitting your application, gather your receipts and other documentation to show how the funds were used. This includes all payroll costs and other eligible expenses. The SBA may review these submitted documents during their audit or loan review processes, so be as accurate and thorough as possible.

    After submitting your application, keep an eye out for the final verdict. The SBA or your individual PPP lender will let you know whether you received loan forgiveness.

Does PPP loan forgiveness affect your credit scores?

Loan forgiveness for the PPP simply means you're no longer required to repay some or all of what you owe, so it won't automatically affect your credit scores.

However, if you don't qualify for forgiveness, you'll be responsible for repaying any funds you received from the PPP, plus interest. In this case, it's important to stay on top of any loan payments. Falling behind or defaulting on your loan could negatively impact your credit scores and make it challenging to obtain additional credit in the future.

If you're struggling to keep up with your PPP loan payments, consider the following:

  • Aim to make at least your minimum monthly payments. Although it may be difficult, try to make at least the minimum payment on your loan each month. Paying only the minimum may draw out the repayment process for your loan, but it will help prevent any damage to your credit scores.
  • Adjust your budget where possible. Take a long, hard look at your budget and aim to cut down on any unnecessary spending.
  • Reach out to your lender directly. If you find yourself struggling even after adjusting your budget, contact your lender about a modified payment plan or other relief options. If you or your business is still struggling to recover, your lender may be willing to work with you and help you get back on track.
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