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PPP Loan (Paycheck Protection Program) keeps the workforce employed.

After several months of problems for many small business owners, more economic relief is finally on the way. The US congress allocated $285 billion for more Paycheck Protection Program (PPP) loans.

This includes provisions to help those that are struggling the most—even the smallest of small businesses. If you already received a PPP loan in 2020, you could still qualify for a Second Draw on your PPP loan in 2021.

How does loan forgiveness work?

  • If employees and payroll have remained consistent with pre-COVID levels, you can have up to 100% of your loan forgiven.
  • Any amount that is not forgiven will be treated as a two-year loan with a 1% fixed interest rate, to keep business from going under.
  • The SBA will forgive the portion of the loan used for payroll, rent, mortgage interest or utility payments for up to 24 weeks after the loan is issued.
  • All payments like principal, interest, and fees are deferred until you receive a decision on your loan forgiveness application. However, interest will continue to accrue over this period.

Who can apply?

First PPP loan:

Sole proprietors, independent contractors, self-employed persons, and small businesses with up to 500 employees in operation at least since February 15, 2020, can apply for the first PPP.

Second PPP loan:

Sole proprietors, independent contractors, self-employed persons, and small businesses with up to 300 employees in operation at least since February 15, 2020, who experienced at least a 25% decrease in revenue in a quarter in 2020 relative to a quarter in 2019 (or the full year of 2020 relative to 2019), and who have already used or will use the full amount of their first PPP loan, are eligible to apply.

You can apply for full or partial loan forgiveness. A 100% forgiveness application can be approved if:

At least 60% of the loan is used to cover qualifying payroll costs, and the full extent of the loan is used towards qualifying costs.

You will be given 5 years to repay any amount not forgiven, from the date your loan was deposit.

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Filling Out the PPP Forgiveness Application

Whether you have employees or not will affect the how the application is filled out. The most complicated part of filling out the forgiveness application is filling out the payroll sections, and there are rules to determine what defines as a payroll cost.

Payroll includes:

  • Salary, wages, commissions, or compensation like these.
  • Payment of cash tips or equivalent (based on employer records of past tips or, in the absence of such records, a reasonable, good-faith employer estimate of such tips).
  • Payment for vacation, parental, family, medical, or sick leave.
  • Payment for the provision of employee benefits consisting of group health care or group life, disability, vision, or dental insurance, including insurance premiums, and retirement.
  • Payment of state or local tax assessed on the compensation of employees.

Generally, payroll costs that are paid or incurred during the covered period are eligible for forgiveness.

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