Since March of 2020, almost thirty-three million people have contracted COVID-19. While this pandemic has had an unprecedented effect on the health of our nation it isn’t the only thing that’s been damaged.
Thousands of businesses, from restaurants to concert venues, have been struggling to stay afloat in these socially distanced conditions. To incentivize businesses for keeping employees on their payrolls the government designed a PPP loan.
However, did you know that people who take out a PPP loan might also be eligible for loan forgiveness? In this article, we’ll give you a brief crash course in PPP loans. Let’s get started!
What is a PPP Loan?
PPP stands for Paycheck Protection Program. This was a government-sponsored program passed in response to the COVID-19 pandemic. It allocated $953 billion to help certain types of businesses and self-employed individuals.
Ostensibly, the program was supposed to help the economy by giving businesses an incentive for keeping employees on their payroll. The loan allows eligible entities to apply for private, low-interest loans that they can use to pay their employees.
There are two types of PPP loans available: first draw ones and second draw ones.
How Does a PPP Provide Loan Forgiveness?
Certain entities may also be eligible to apply for complete loan forgiveness.
So what are the eligibility requirements? During the eight to twenty-four week loan period, a business is eligible for loan forgiveness if they fulfill the following areas:
- They maintain employee compensation levels completely
- They spend the loans on payroll costs or other eligible expenses
- They spend at least 60% of the loan on payroll costs
If you meet these qualifications, then you can apply for loan forgiveness. The terms for loan forgiveness are the same for both first draw and second draw loans. You can apply for a loan once you use all available funds provided by the loan.
Just make sure you apply within ten months of the final cover period date. Otherwise, the payments can no longer be deferred.
Who Is Eligible for a PPP?
As of right now, the SBA is currently only offering PPP loans to qualifying financial institutions. This includes things like Community Development Financial Institutions (or CDFIs), Certified Development Companies (or CDCs), SBA Microlenders, and Minority Depository Institutions (or MDIs).
These financial institutions can take advantage of the loan as long as there are existing funds. Look here to learn more about what types of institutions can qualify for a PPP loan.
Want More Content? Keep Exploring
We hope this guide helped you learn more about PPP loans. As you can see, this type of loan doesn’t just provide you with temporary funds. It’s also possible for it to forgive debts that you already own.
So, see if you qualify for the program today. Did you enjoy this article? If the answer is yes, then you’re in the right place. Keep reading to find more topics that you’re sure to love.