Every business owner who applied for PPP funding had loan forgiveness in mind when they hopped on board. But up until now, only a handful know the leniency criteria and how to apply for it.

With poor communication from loan providers and limited resources to refer to, most entrepreneurs now rely on incomplete info from their business counterparts or online sources.

This guide will take you through everything you should know about leniency and the Paycheck Protection Program.

What Requirements Must You Meet to Enjoy Leniency?

PPP loans were disbursed in two phases but the loan leniency requirements are similar for all applicants.

For full leniency, you must retain your employment and payroll levels throughout the loan period. Plus, you must have spent the lump sum on eligible expenses as we shall discuss below. As a rule of thumb, however, at least 60 percent must go to Payroll.

The loan period for most 2020 PPP loans is 24 weeks after the loan disbursal. However, those who received funding before June 5, 2020, can follow the previous eight-week span. 

Which Expenses are Forgivable?

Previously, PPP loan forgiveness was strict to payroll and operational costs but a Dec 2020 COVID relief added more expenses to the list. 

To enjoy forgiveness you must have spent the money on;

  • Payroll: This covers all salaries plus tips, dividends, and commissions. However, expenses for staff earning over $100,000/year aren’t forgivable.
  • Operating costs: Rent, utilities, accounting, commercial software, mortgages, and interests are all eligible for leniency.
  • Property damage: PPP also forgives expenses incurred when fixing damages or losses due to plundering caused by a public interruption during COVID. Anything protected by insurance does NOT qualify.
  • Employee protection: All costs related to PPE and workplace safety are eligible.
  • Supplier expenses: This is the amount you spend to purchase the goods that matter to your business. To enjoy forgiveness, the purchase orders must have been made before the loan period. But orders for perishable items placed within the loan period are also forgivable.

Remember, all expenses incurred pre-loan but sorted within the loan period are forgivable. The same applies to the expenses incurred within the loan period but sorted post-contract as long as you clear them on or ahead of the following billing or payroll date.

Applying for PPP loan leniency

Once you’re ready to apply for leniency, reach out to your PPP provider. They may ask you to fill a loan forgiveness form that you should submit along with papers indicating how you spent the lump sum.

Organizing these papers upfront simplifies the application process increases the chances of forgiveness.

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