PPP Loans are Coming to an End—What’s Next for Your Business?

In just over a year, after two major extensions, the Small Businesses Administration (SBA) deployed nearly $953 billion in forgivable loans to U.S. small businesses, thanks to the Paycheck Protection Program (PPP). 
 
If your business is one of the 8 million small businesses that secured funding during the pandemic, it’s time to think about next steps. PPP loans were critical for the survival of small businesses, but the program came to an official end on May 31, 2021. 
 
You may already be trying to navigate PPP loan forgiveness, or you might be seeking alternative or additional financing in preparation for a return to market—whether you received PPP funding or not. 
 
With a consumer rebound looming, business owners need to get back up to speed. This article will guide you through loan forgiveness and help you identify next steps if your business is still in need of financing.  

Securing loan forgiveness for first or second draw PPP loans

You’ll qualify for full loan forgiveness if during the 8-24 week covered period following loan disbursement you meet the following criteria:

  • Employee and compensation levels are maintained
  • At least 60% of the proceeds are spent on payroll costs and other eligible expenses

If there was a reduction in employees, you can still apply for forgiveness. However, depending on the circumstances, the forgiveness amount might be less than the loan amount. Borrowers may apply for loan forgiveness any time before their loan’s maturity date (or within 10 months of the last day in the covered period) to avoid any payments. First American Bank simplifies the process by providing the resources you need to complete your application on time. 
 
For qualified 2020 PPP borrowers, invitations to apply for forgiveness have already been extended and we are working diligently to process those applications. 

For 2021 PPP borrowers, forgiveness applications are not yet being processed, but will proceed in a similar fashion once the First Draw PPP loan forgiveness applications are complete. 
 
How to meet the first draw PPP deadline—and what happens if you don’t qualify 
 
Loans issued prior to June 5, 2020, have a maturity of two years. Loans issued after June 5, 2020, have a maturity of five years. 
 
If you’re a PPP borrower who has not yet applied for forgiveness, deferment will end 10 months after the end of the 24-week covered period. For instance, if your covered period ends in October of 2020, you will be required to make payments starting in August 2021—which can still be remitted if you submit an application before the terms of the loan expire.
 
If you don’t qualify for loan forgiveness (for example, if PPP funding was used for unauthorized purchases), first payments will be due at the conclusion of the 10-month deferment period. 
 
How to prepare your second draw PPP forgiveness application 
 
For borrowers who received PPP payments in the second round (on or after January 11, 2021), it’s important to start preparing your application early. You’ll need to prove eligibility, and most payroll services will provide the required supporting documentation. Alternatively, if you process payroll internally, be sure to have all your payroll records handy.  Keep in mind that if you used PPP funding to cover other eligible expenses (rent, utilities, PPE, etc.), careful documentation will be required in the form of invoices, receipts or bank statements. 
 
Your PPP lending partner can direct you to the correct application form (SBA Form 3508, 3508EZ, 3508S, or a lender equivalent). If you’re a First American Bank partner, you’ll receive an invitation to apply for second round loan forgiveness once first round applications have been processed. 
 
For more information regarding the documentation and eligibility requirements needed to secure loan forgiveness authorization, visit the SBA’s PPP loan forgiveness page.  

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