From the Florida United Businesses Association Newsletter of August 2020
*Note: As this newsletter went to press, Congress was debating a bill that would simplify the PPP loan forgiveness process. If this bill becomes law, all PPP loans under $150,000 would be automatically forgiven. You may want to wait to see what happens with this legislation before you apply for loan forgiveness.
If your business received a loan from the Paycheck Protection Program (PPP), you can apply to have your loan forgiven (which means you don’t have to pay it back) if you spend the loan on approved expenses.
To be eligible for loan forgiveness, you must spend at least 50% of the loan amount on payroll for employees (salary/wages, health insurance, retirement, paid leave, and state unemployment taxes) and no more than 40% of the loan on rent, utilities (including phone and internet bills), and mortgage interest.
To apply for loan forgiveness, you will need to file an application with the bank that issued the loan to you. If your business had to reduce the number of its employees or their wages by 25% of more during the pandemic, you will use Form 3508. Form 3508 is available from the US Small Business Administration at: sba.gov/document/sba-form-paycheck-protection-program-loan-forgiveness-application.
Detailed instructions for Form 3508 at available at: sba.gov/document/sba-form-paycheck-protection-program-loan-forgiveness-application-instructions-borrowers.
If your business did not reduce the number of its employees or their wages, you can use Form 3508EZ, which is a simpler, more streamlined form. The simplified Form 3508EZ is available here: sba.gov/document/sba-form-paycheck-protection-program-ez-loan-forgiveness-application.
Businesses now have an expanded 24-week period to use the proceeds of their PPP loan. If you are considering applying for forgiveness at the 8-week mark but have not spent all your loan, you may want to take advantage of the 24-week period to include additional expenses.
Your bank has 60 days to review your application and decide if the loan will be forgiven. Any amount of your PPP loan that is not forgiven will be converted to a traditional loan with a 1% interest rate.
The amount of your PPP loan forgiveness can be reduced if you have fewer employees or lower employee salaries after receiving your loan than you did before the pandemic.
Businesses will not be penalized if they make a written offer to rehire a laid-off employee who refuses to return to work. If you try to re-hire a furloughed employee and they refuse to come back to work, this will not count against you as long as you document your rehire offer in writing (email is fine) and document the employee’s response so you can prove that you tried to rehire them but they refused your offer.
Employees who were fired for cause, voluntarily resigned, or who voluntarily requested a reduction in their hours also do not count against you for loan forgiveness. Again, make sure to document these decisions in writing (email is fine).
Also, if you cannot go back to your pre-pandemic staffing levels because your business is complying with worker or customer social distancing measures, your loan forgiveness will not be penalized.
If you have any questions about PPP loan forgiveness, you can ask the FUBA experts by calling our offices at 800-262-4483 or by emailing us at email@example.com. More information, including all the forms mentioned in this article, is available from FUBA’s coronavirus resources page for small businesses at fuba.org/coronavirus-resources.