The PPP or Paycheck Protection Program is a loan designed to provide a direct incentive for small businesses to keep their workers on the payroll. The loan is provided through the small business administration and will forgive loans if all employee retention criteria are met, and the funds are used for eligible expenses. Here are some recent updates to the PPP.
PPP applications have been extended through August 8, 2020. As the coronavirus continues into the fall and is currently creating hot spot areas across the country, more small businesses are seeking financial support.
How to apply:
Anyone can apply through any existing SBA 7(a) lender or any federally insured depository institution, federally insured credit union, and Farm Credit System institution that is participating. Other regulated lenders will be available to make these loans once they are approved and enrolled in the program. Consult with your local lender(s) to see whether they are participating in the program. The SBA has a link to see current lenders here: View a list of lenders participating in the Paycheck Protection Program by state. If you wish to begin preparing an application, you can download a copy of the PPP borrower application form (revised June 24, 2020) to see the information that will be requested from you when you apply with a lender.
What to know:
Loan forgiveness is based on the employer maintaining or quickly rehiring employees and maintaining salary levels. Forgiveness will be reduced if full-time headcount declines, or if salaries and wages decrease. Employee and compensation levels must be maintained to qualify for the PPP and be considered for forgiveness.
Can the loan be forgiven entirely?
Yes. PPP loans (the full principal amount and any accrued interest) may be forgiven, meaning they do not have to be repaid. If you do not apply for forgiveness, you will have to repay the loan. You should maintain documentation showing you used loan funds for eligible purposes to help facilitate the forgiveness process. Businesses have up to 24 weeks from the date you received the loan to spend the funds and be eligible for loan forgiveness.
For any portion of your PPP loan that is forgiven, you won’t be able to deduct those business expenses covered by PPP forgiveness on your 2020 taxes. You won’t be able to count the forgiven portion of your PPP loan as part of your 2020 gross income, either. Be aware of this as you apply for the loan. Accountants may look to the CARES Act explicitly; loans forgiven under the PPP are not subject to taxation as discharge of indebtedness income as they shall be excluded from gross income. Accordingly, additional taxable income should not result from the forgiveness of PPP debt. For state income tax purposes, it will vary based on state tax laws.
PrideStaff Financial has consistently won awards for exceptional client satisfaction. Our highly skilled staffing consultants can help you navigate this difficult time and provide staffing solutions. Contact us today to learn more.