To qualify for PPP loan forgiveness, you obviously need to have received a PPP loan. But just as importantly, you need to have used your loan in specified ways.
As your lender should have told you, your PPP loan came with a covered period, which was basically a short amount of time when you could use your PPP loan in ways that qualify you for loan forgiveness.
Depending on when you got your PPP loan, your covered period could be between 8 and 24 weeks long. (The CARES Act set it at 8 weeks, but later acts revised the length to up to 24 weeks.) Regardless of the length, your period started when your lender disbursed your loan (gave you the PPP loan proceeds).
You qualify for loan forgiveness if, during that covered period, you met the following conditions:
- Employee levels stayed the same
- Employee compensation levels stayed the same
- You spent the loan money on eligible expenses
- You spent at least 60% of your loan on payroll expenses
Note that these rules apply to both First Draw PPP loans and Second Draw PPP loans.
If you didn’t perfectly meet those conditions, don’t give up just yet. Even if you don’t qualify for complete forgiveness of your loan proceeds, you may qualify for partial forgiveness. And a loan forgiveness reduction is better than no forgiveness at all.
Now, to actually get your loan forgiven, you can’t just meet these conditions―you need to go through the forgiveness process by submitting an application.