5 Things To Know About the PPP Loan Forgiveness Program

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By Anil Grandhi

With 12.9% of the over $500 Billion in PPP loans going to the healthcare sector, which included doctors’ and dentists’ offices and social assistance companies, healthcare was the top recipient of this coronavirus-related government stimulus package. Getting this lifeline was the first phase but now companies need to prepare for loan forgiveness. Here are 5 things every healthcare company who received PPP loans should know:

1. Know the terms.  PPP loan forgiveness is dependent oneach recipient meeting certain requirements. These must be met in order to qualify for the full forgiveness amount, and include: 

  • Spending at least 60 percent of the loan proceeds on your payroll;
  • Maintaining full-time equivalent (FTE) until the end of the covered period, or with the option to reach the required FTE number by Dec. 31, 2020;
  • Reducing employee salaries by no more than 25 percent during the covered period.

In order to be eligible for forgiveness, loan proceeds must cover payroll costs paid and payroll costs incurred, but not yet paid, during the Covered Period or Alternative Payroll Covered Period, if paid by the next regular payroll date. The loan covers employee gross pay including salary, wages, commissions, bonuses, and tips, capped at the annualized value of $100,000 for the length of the applicable Covered Period.

2. Know the eligibility requirements. Businesses that received a PPP loan of $50,000 or less, can receive full forgiveness of loan, regardless of changes in employee headcounts or pay rates. 

Borrowers must make representations about how they handled their PPP loans and maintain required documentation as backup.

3. Know what documentation you will need. While you should certainly document everything possible related to your PPP loan, there are certain documents that you will be required to submit to your lender in order to be eligible for forgiveness. 

  • Payroll documentation that shows the cost of payroll during the loan period;
  • Proof of the average number of FTE employees on your payroll;
  • Proof of payment for eligible operating costs – interest on mortgage payments, rent payments, utility payments, for which service began before February 15, 2020.

The documents that will show this include payroll reports, accounting records, payroll tax filings (Form 940, 941), bank statements, utility bills, lease agreements, and a mortgage loan amortization schedule.

4. Know when to apply. Businesses can start applying now for PPP loan forgiveness but do not be in a hurry to do so—the loan payment is deferred till 10 months from the end of the 24-week covered period of your loan. Forgiveness applications can be submitted any time before the maturity date of the loan, which is either two or five years from loan origination.

If your loan was for $50,000 or less, you’ll want to take advantage of the recent introduction of Form 3508S. This is a one-page PPP loan forgiveness application with self-certifications and declarations. 

5. Know about upcoming legislation. A bill currently in the Senate may allow for automatic forgiveness for loans of $150,000 or less after submitting a one-page attestation form. If passed, this new proposed legislation would be highly beneficial to both small business borrowers and lenders, as it will reduce documentation and paperwork significantly. We expect to hear updates on this option soon.

Anil Grandhi is CEO & Founder of Seattle-headquartered AG FinTax, providing expertise and guidance nationwide to entrepreneurs and small businesses on tax planning, CFO services, wealth management, and the PPP loan forgiveness process. AG FinTax serves multiple industries across the US, including healthcare companies. They are a one-stop solution helping customers make strategic, timely decisions that take their businesses to the next level. He can be reached atanil@agfintax.comor (425) 395-4318

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