ppp loan forgiveness

Paycheck Protection Program (PPP) Loan – Guide

If you are the one who’s gonna draw the first Paycheck Protection Program (PPP) and the second draw PPP then this post is just for you. In this article, we are exploring the Paycheck Protection program entirely that helps you in filling up the PPP program loan form. So let’s check out the article now.

What is the Paycheck Protection Program? 

The Paycheck Protection Program may be a loan program that originated from the Coronavirus Aid, Relief, and Economic Security (CARES) Act. This was originally a $350-billion program intended to supply American small businesses with eight weeks of cash-flow assistance through one hundred pc federally guaranteed loans. The loans are backed by the tiny Business Administration (SBA).

The program was then expanded by the Paycheck Protection Program and Health Care Enhancement Act in late April, adding a further $310 billion in funding. The Paycheck Protection Program Flexibility Act made important changes to the program allowing longer to spend the funds and making it easier to urge a loan fully forgiven.

Then on December 27, 2020, a second stimulus package was signed into law topping up the program with a further $285 billion in funding and updating the eligible expenses. It also opened a second PPP loan for businesses that spent their first PPP loan and have experienced a 25% or greater decrease in revenue.

Payroll Protection Program Loan – Highlights

The following may be a high-level overview of the PPP loan program, which we’ll cover in additional detail within the remainder of this text.

  • All small businesses are eligible
  • The loan features a maturity rate of two years and a rate of interest of 1%.
  • Loans made after June 5, 2020, have a length of 5 years.
  • The loan covers expenses for twenty-four weeks ranging from the loan disbursement date
  • There are no collateral or personal guarantees required
  • No fees

At Bench, we’re helping businesses navigate stimulus funding by connecting them to lenders and assisting with PPP forgiveness applications.

Who’s Eligible for A Payment Protection Program Loan?

Paycheck Protection Program loans are farther reaching than SBA disaster loans. Small businesses, sole proprietorships, independent contractors, and self-employed individuals are all eligible.

1: Sole proprietorships will get to submit a Schedule C from their income tax return filed (or to be filed) showing the internet takes advantage of the only proprietorship.

2: Independent contractors will get to submit Form 1099-MISC (now 1099-NEC in 2020) additionally to their Schedule C.

3: Self-employed individuals will have to submit payroll tax filings reported to the Interior Revenue Service.

What can Employers Use PPP Program Funds For?

ppp loan forgiveness calculator

If you’re taking out a PPP loan, you would like to spend the cash on qualifying expenses if you would like it to be forgiven. 

For PPP forgiveness, use the loan on the following eligible expenses:

Payroll costs (60% of loan proceeds)

  1. Salaries, wages, commissions, or tips ($100,000 max per employee—gross earnings)
  2. Employee benefits (e.g., vacation; sick leave; health care benefits; retirement benefits; and group life, disability, vision, and dental insurance)
  3. State and native taxes

Non-payroll costs (40% of loan proceeds)

  • Interest on mortgages
  • Rent
  • Utilities
  • Covered operations expenditures (e.g., business software or payroll tracking expenses)
  • Covered property damage (e.g., vandalism or looting)
  • Supplier costs (i.e., essential items for operation)
  • Worker protection expenditures (e.g., personal protective equipment)

The Consolidated Appropriations Act expanded eligible expenses to incorporate covered property damage; supplier costs; worker protection expenditures; and group life, disability, vision, and dental insurance.

Keep in mind that independent contractors aren’t on the payroll. Because they do not count as employees, don’t include their payments when calculating your payroll costs.

You May Also Like this – Learn How to Calculate Your Paycheck Protection Program Loan Amount

How much Payroll Protection Program Funding an Applicant can Receive?

The maximum amount you’ll receive from your SBA-approved lender is your monthly average payroll cost in 2019, 2020, or the one-year period before the appliance. Multiply it by 2.5, up to a maximum of $2 million.

For businesses within the food and accommodation industries, you’re eligible for 3.5 times your average payroll costs, also with a maximum of $2 million.

If you’re a seasonal employer, the monthly average payroll cost is going to be calculated differently. You’ll use any 12-week period between February 15, 2019, and February 15, 2020.

What is the Process to Apply for a Payroll Protection Program Loan?

The SBA itself doesn’t lend you the cash, they only “back” the loan that the lender provides. For that, you simply will have to fill a form.

You have to verify:

1: Current economic uncertainty makes the loan necessary to support your ongoing operations.

2: The funds are going to be wont to retain workers and maintain payroll or to form the mortgage, lease, and utility payments.

3: Documentation that verifies the number of full-time equivalent employees on payroll and therefore the dollar amounts of payroll costs, covered mortgage interest payments, covered rent payments, and covered utilities for the 24 weeks after getting this loan.

4: You acknowledge that the lender will calculate the eligible loan amount using the tax documents you submitted. 

5: If you’re applying for your second draw PPP loan, you’ve already spent the funds from your first draw PPP loan.

Financial documentation you’ll need

You’ll get to provide payroll/bookkeeping records to prove your payroll expenses.

That could include:

  1. Payroll processor records
  2. The Payroll tax filings
  3. Payroll tax forms from 2019 or 2020 (Forms 941, 940, and W-3)
  4. Form 1099-MISC records
  5. Schedule C for a sole proprietorship

If you’ve got employees (and you’re paying yourself through payroll too), the simplest thanks to getting the financial information you’ll need are by downloading a payroll report through your payroll provider.

If you own quite one business

We are hearing reports that entrepreneurs who own quite one business are having difficulty getting relief funding when their businesses don’t have cleanly separated finances. If you own quite one business, it’s important to urge separate bookkeeping finishes for each business. This may become doubly important when it comes time to prove your expenses for loan forgiveness. 

Last Words!

So, that’s the end of the article. I hope this informative article helped you well to understand the PPP program and its other related aspects. The paycheck Protection Program also provides forgivable low-interest loans to all the small business industries that are facing issues due to COVID-19 Pandemic. For more details, you can also visit our website and if you like this article or have any suggestions for us please write them down in the comment section below.     

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