5 Frequent PPP Loan Forgiveness Issues and How to Fix Them

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  5. 5 Frequent PPP Loan Forgiveness Issues and How to Fix Them

For many companies, the U.S. Government’s Payroll Protection Program (PPP) seemed like oxygen to the lungs as they struggled to make payroll. Sole proprietors and independent contractors also needed the relief it provided to keep their businesses alive.

Through the PPP, $793 million was issued to over 11 million businesses. Now, many of those small businesses have applied for PPP loan forgiveness and are experiencing problems getting their forgiveness applications approved.

To help you overcome hurdles if you’re about to apply for PPP forgiveness or submit a second application, here are five issues small businesses are running into and how to fix them.

1) Single-employee businesses need to provide documentation showing that PPP funds were used to support their salary. Prove that you used the funds correctly by providing cancelled checks or copies of your check ledger.

2) Companies with multiple full-time employees are not providing documentation that they rehired or replaced furloughed full-time employees and have the same number of full-time employees they did when applying for a PPP loan.

3) Businesses that needed to lower salaries during the Covid shutdown and used PPP funds to pay reduced wages are not providing documentation that they returned salaries to their previous rate by December 31, 2020.

4) Complete loan forgiveness or approval is not being given to businesses not proving that at least 60% of the funds were used for paying employees.

Many loan denials stem from submitting incomplete loan forgiveness applications. A completed loan application must include the following:

  • Employee status for each full-time employee on the payroll
  • Wage or salary rates for each employee
  • Real-estate leases and mortgage paperwork
  • Evidence of rent paid
  • Utility bills

Without this information included, it’s likely your application was denied. The SBA requires these documents to ensure fraud was not committed or documents were falsified.

5) As they process your application for PPP forgiveness, they discover mistakes or omissions in the initial paperwork you submitted. These mistakes or omissions will slow down the processing of your application.

Because an application is considered the same as testifying under oath, consider talking with legal counsel if your original application is now being questioned.

The government wrote the False Claims Act to address potential fraud issues. It’s expected that the Department of Justice will be investigating more potential fraud issues, as well as states that have adopted their own version of the False Claims Act.

Reducing the Risk of Application Denial

Your PPP loan forgiveness application will be carefully scrutinized. Submitting data and evidence to support the information in your application is critical to loan forgiveness. Documentation showing how the PPP funds were used must be provided with your application. 

Estimating how the funds were used is also not acceptable. Your documents have to be 100% accurate to be granted forgiveness.

Submitting a second PPP loan forgiveness application should go smoother because you know what the SBA is looking for and where they’ll focus their attention when reviewing your application. 

Did you know you can still claim the Employee Retention Credit (ERC) even if you received a PPP loan?

Talk with one of our experts at Bottom Line Concepts today, and let us help determine if your business is eligible and what the amount of your credit will be.

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