The Top Nine PPP Loan Forgiveness Problems

As part of the Covid-19 assistance program, $793 billion was distributed to 11.5 million small companies through the Paycheck Protection Program (PPP). The funds were meant to enable small firms to keep paying workers while they were off the job due to the pandemic. Small firms that accept PPP loans are eligible to apply to the US government for loan forgiveness. As a result, they could use the money without having to pay it back.

However, there are problems with PPP loan forgiveness for a lot of small enterprises. You want to be aware of the challenges before submitting your application for the second PPP debt forgiveness.

What issues with PPP loans result from such applications being rejected, then? If loan forgiveness is your primary objective, you’ll want to make sure your second PPP loan forgiveness application is accepted.

Companies With a Single Employee

The PPP initiative is thought to have contributed to the preservation of about 86 million American employment. Loans totaling roughly $10.5 million have already been forgiven.

It’s interesting to note that a sizable proportion of businesses with just one employee appear to be having their loan forgiveness requests rejected. These would be sole proprietorships and independent contractors in the business.

When applying for debt forgiveness as a single-employee corporation, you must carefully detail how the money was utilized to pay your wage.

Number of Full-Time Employees

To prevent issues with PPP loans, there are several prerequisites for loan forgiveness. You might need to work on the documentation to show you meet these standards if your application was first declined.

One entails full-time workers. During the Covid shutdowns, you might have forced some full-time employees into furlough. You had the same number of full-time employees when you applied for the PPP since it was anticipated that you would rehire them or hire someone else in their place.

To be eligible for full forgiveness, you have until December 31, 2020, to retain and demonstrate the return of your full-time personnel. If you didn’t accomplish this, you might only be eligible for partial forgiveness.

Restore the Compensation Reduction

During the Covid closure, several companies will need to reduce compensation. To pay the lower wages, they made use of PPP funding.

Restoring salaries to their pre-reduction levels is one prerequisite for forgiveness. There was a permissible salary cutoff point.

By December 31, 2020, the salaries must have reached that threshold to qualify for forgiveness.

You might only be eligible for partial forgiveness rather than a full one if you just partially or not at all received the salaries restored to their prior rates.

60/40 Split

Another prerequisite for PPP loan forgiveness was the intended use of the money. It meant to continue paying employees even if they had been placed on furlough during the shutdown.

Not all PPP revenues, though, have to go into paying personnel. Additionally, it could be applied to expenses like business rent and utilities.

However, payroll costs required that 60% of the cash be utilized. You might not be given approval or total forgiveness if you didn’t reach or sufficiently demonstrate that you completed the 60% criterion.

Application for Loan Forgiveness

Your possibility of receiving loan forgiveness depends on how carefully you fill out your application. It is necessary to provide paperwork to demonstrate that your company utilized PPP money as intended for staff retention and payroll.

There are some hints that the government is searching for applications that demonstrate fraud or include documents that were fabricated as part of the request for pardon.

Be ready to provide the following documentation with your loan application:

• Each full-time employee’s employment status as shown on the payroll
• Rates of compensation for each full-time employee
• Leases for real estate and mortgage documents
• Proof of rent payment
• Utility costs

Under Oath Request

All of the information on the first loan applications for PPP loans, which were submitted under penalty of perjury, was true.

A lot of attention is paid to fake applications or revealing a partial truth as the government sorts through the millions of petitions for loan forgiveness.

You should be aware that submitting your application is equivalent to swearing under oath that all information is true and accurate.

As if you were under oath, you must ensure that all information has been verified and meets all requirements.

Errors and Omissions in Original Documentation

The first time PPP loans were made available to small firms, they were in dire need of cash. It was a mad rush for many enterprises to finish the funding applications.

Some firms are discovering issues with their initial loan documentation as they work on forgiveness applications.

Before recognizing an error or waiting for the SBA to see it, you should consult legal counsel if you discover one.

False Claims Act

The False Claims Act was created by the federal government to combat potential fraud problems. It’s anticipated that the Department of Justice will employ the False Claims Act in more instances to combat fraud issues.

Additionally, the FCA has been enacted by numerous US states.

Verify and Confirm

You should submit your forgiveness application or reapplication with the understanding that it will be thoroughly reviewed and that you will be put under oath.

To be granted loan forgiveness, you must have the information and supporting documentation to back up your claim.

Gather information and documentation to demonstrate how you’ve used PPP funding after carefully reading the requirements.

Before submission, have a reliable advisor or business partner carefully review your application. If you want forgiveness, your documentation must be entirely accurate.

To Sum Up

The good thing is that you are more knowledgeable about what to do in a second PPP loan forgiveness application. You should be aware of the areas on which the SBA will concentrate their attention while examining your application.

Please get in touch with Your Part Time Accountant for assistance if you have any issues.