PHOENIX (3TV/CBS 5) -- The clock is ticking for thousands of Arizona business owners to ensure recent small business loans through the federal government's Paycheck Protection Program are forgiven.
According to the U.S. Small Business Administration, more than 74,000 businesses in Arizona have been approved for PPP loans totaling almost $8.5 billion. An eight week countdown starts the moment the money from this loan program hits the bank account, and business owners must apply for loan forgiveness through their lender at the end of that loan period. Many of the businesses who received loans are already coming up on that eight week time frame.
The application for forgiveness is more complicated than the original loan application, according to Chris Camacho, the president of the Greater Phoenix Economic Council, so he says it is important for business owners to be in regular communication with their lenders.
Loans can be forgiven if 75% of the loan was used on payroll. According to SBA, forgiveness will be reduced if the full-time headcount declines or if salaries and wages decrease. The remaining 25% can be spent on expenses including utilities, rent, or mortgage payments.
Camacho acknowledges there is some confusion and frustration among business owners about how and when they money needs to be spent.
"I know congress is working through some fixes on this as well as the SBA and Treasury because our goal would be to make this as flexible as possible, ideally extending the timeframe," Camacho said. "That's why I said the guidance is very important in staying up to this on a daily basis because the rules are changing on a regular basis, so let's make sure we're following through."
Camacho says documentation is critical. Business owners should be tracking every penny spent with PPP money. PPP funding that is not forgiven will turn into a two year loan with a 1% interest rate. According to SBA, funding is still available through the program.