The answer to this is quite simple. Three words: Because You Can.
Before the PPP Flexibility Act was passed, business owners were required to fully spend all their PPP loan funds on eligible expenditures like payroll, utilities, rent (or mortgage interest), and some operations expenditures— before they would be eligible to apply for forgiveness. Not anymore.
Now business owners can apply for early PPP loan forgiveness. This means that business owners don’t have to wait until they have spent all of the funds to apply for forgiveness. But there are some things that business owners should be doing.
Small Business Loan Application Help
First and foremost, all business owners need to keep complete records of business expenditures for the covered period of the PPP loan, even if their records were just okay beforehand. Depending on the amount of the loan, the SBA or your lender may require records of PPP expenditures, and even if they don’t (in the case of loans below $150,000 they will not) you are required to keep those records. Per the forgiveness application:
“The Borrower must retain all employment records/payroll documentation in its files for four years and all other documentation for three years after the date the loan forgiveness application is submitted to the lender, and permit authorized representatives of SBA, including representatives of its Office of Inspector General, to access such files upon request.”
So the SBA can ask you for documentation with respect to your PPP loan expenditures for at least 3 years AFTER you submit your forgiveness request. The earlier you apply, the early the three year period expires.
In addition, business owners must continue to spend all of the PPP funds within the covered period, regardless of when the loan was forgiven. Simply put, if you are forgiven in the middle of your covered period and still have PPP funds you need to spend them before the end of the covered period as per the rules of the PPP loan. If you don’t, you’ll be stuck with an actual loan that needs to be paid off in 5 years at 1 percent. While the terms aren’t terrible, having your PPP loan fully forgiven is a much better alternative.
Apply Now!
There’s really no good reason not to apply for forgiveness early, regardless of your business size. It takes one thing off your busy to do list, and once it’s done, all you have to do is stay true to the PPP loan rules for the duration of the covered period, and you’ll have nothing to worry about (unlike this PPP rule breaker.)
Keep good records, friends. Not only will it protect you from any suspicion of PPP fraud, but you’ll also find that it will likely improve your bottom line.
Here at Disaster Loan Experts we have a team of PPP loan forgiveness experts who get you through the process quick and painless. Click here for a free quote and to have an expert contact you.