What is Paycheck Protection Program Loan and How it can be Forgiven

What is Paycheck Protection Program Loan and How it can be Forgiven

What is Paycheck Protection Program Loan 

The Paycheck protection program or for short known as PPP loan is a relief program during the COVID-19 pandemic, which is developed by the CARES Act to encourage small businesses to keep employees on the payroll directly. The SBA will cancel or forgives the PPP loan if all employees remain on the payroll for eight weeks, and the money will be used for payroll, rent, mortgage interest, or public services.

This loan program is launched so that the employees and workers will get their wages. The maximum loan amount is 2.5 times the average monthly salary for the previous calendar year and has a limit of $10 million per business. The application period began on April 3, 2020. And it lasts until June 30, 2020, or until all funds are allocated. The maturity of the loan is two years, and the interest rate is 1%.

 

Why is there a need for a PPP loan?

The COVID-19 pandemic has a significant impact on small businesses around the world and put them in doubt about the future. In such a difficult time, the U.S. government offered small business owners in the country, Washington, and the U.S. territories an opportunity to apply for emergency funds under the Payment Protection Program (PPP). PPP loans are designed for companies with 500 employees or fewer to help employees stay on the payroll during the crisis. These PPP loans are 100 percent forgivable if and only if you meet PPP loan repayment requirements issued by Small Business Administration (SBA).

 

Is Paycheck Protection Program Loan Forgivable?

The loan will be discontinued entirely if the funds are used for Payroll costs, interest on mortgages, rents, and utilities (due to the likely high underwriting, at least 75% of the amount released was to be used on the payroll). Loans will also be deferred for six months. No personal security or guarantee is required.

Loan forgiveness is that the employer maintains or repackages them quickly and maintains the level of wages. Remission will be reduced if the number of full-time employees decreases or wages and salaries decrease. The maturity of the loan is two years, and the interest rate is 1 percent. Well if you have used the loan and want it to be forgiven? it can be done under some conditions so if you want to check that are you eligible for the PPP Loan forgivness click here.

 

How does PPP Loan Forgiveness work?

After being approved and receiving the PPP loan, you should consider a few things to keep a details record:

  • Create a separate expense account to accrue all eligible costs
  • Keep the loan funds in a different bank account and withdraw them only to cover qualified expenses

You can apply for loan cancellation by submitting an application to your lender after the eight-week loan period. Your loan application must include documents showing:

  • The number of full-time equivalent employees and payment rates
  • Eligible payment of mortgages, rentals and utilities

Your lender has 60 days to decide to deliver your loan.

 

How does PPP Loan Application work?

Here below, we have mentioned the process of applying for the PPP Loan. Submit all your business-related information. We will verify all the details you have sent. After documentation verification, we will review your application and send it to the SBA. After the submission, SBA will consider it. If you are eligible for it, SBA will approve your request and grant you the PPP Loan.

  • Submit your documents, info and business details (including payroll filings)
  • Document verification
  • Application Review
  • Submitted to SBA
  • SBA response
  • PPP Loan Issued

 

Who can apply for PPP Loan?

All small businesses with 500 employees or fewer can apply for a PPP loan. Here below, we have mentioned a few firms who can easily apply for the loan program:

  • Self-employed individuals
  • Independent entrepreneurs
  • Sole Proprietorship
  • Nonprofits
  • Veterans organizations
  • Tribal business

Conclusion

As Corona-virus Covid-19 has affected all the businesses around the world, the U.S. government has announced a relief package which is known as Paycheck Protection Program PPP, and they declare that these loans can be forgiven. So, if you have taken the loan and now you are thing whether you are eligible for the PPP loan forgiveness, there is nothing to worry about. Taxmagic.tax has all the answers to your questions, so if you have any queries regarding PPP loan forgiveness or you need to know whether you qualify for it or not directly contact us by making a call.

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