When Is the Right Time to Apply for PPP Forgiveness?

Many businesses that successfully received a loan under the Government’s Paycheck Protection Program (PPP) are now starting to apply for loan forgiveness under the Program. However, some are waiting to file their loan forgiveness applications — here’s why.

The Paycheck Protection Program (PPP) was launched by the US government this spring in response to the coronavirus pandemic. Under the PPP, businesses could file for forgivable loans to cover their payroll and other expenses. While the program closed for applications in late June, there have recently been talks of a possible relaunch.

Because the program may make a comeback, many entrepreneurs are choosing to take a wait-and-see approach when it comes to applying for loan forgiveness. Many are hoping that Congress will adjust the rules as to which companies are eligible for forgiveness, will simplify the forgiveness process, or will provide the program with a larger budget to provide further loans.

Currently, PPP loans are forgivable if the borrowing business used at least 60% of the amount they received to cover payroll costs. Those that attributed a smaller percentage to this expense can see their loans partially forgiven. Businesses have 10 months from the end of the period after they stopped using the loan (8 or 24 weeks, depending on the loan’s terms) to apply for forgiveness.

For now, many advisors, including Fundingportal, are telling their clients to wait on requesting forgiveness if they can, in case the program’s rules change.

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