What Can I Do if I Can’t Repay My Covid Business Loans?

The Covid-19 pandemic was a difficult period for consumers and businesses alike. During the nearly two-year financial fallout from the initial spread of the virus, many people struggled to pay their bills. This was especially true of business owners.

Unfortunately, not everyone has been able to recover from this devastation. Many small business owners in Florida have struggled to repay Covid business loans. If you are one of these business owners, take heart – there are still options available to help you!

Your Covid Business Loans May Be Forgivable

Many people do not realize that the loans that were dispersed as part of the Paycheck Protection Program were forgivable. This means that they did not need to be repaid, so long as certain requirements are met.

While the majority of these loans have been forgiven or repaid in the two years since the program became law, there are still plenty of businesses that may be eligible for this forgiveness so long as they cooperate with the laws surrounding them.

First Draw PPP Loan Forgiveness

The first PPP loans paid out are referred to as First Draw loans. These loans have the following requirements for forgiveness:

• Employee compensation levels were maintained for the period of 8-24 weeks after disbursement.
• Funds from the loan were spent on eligible expenses, such as payroll costs.
• At least 60% of total funds were exclusively put towards payroll.

It is important to note that these guidelines apply to the period of 8-24 weeks after the loan funds were received by the business. Careful documentation of this will be required to receive forgiveness.

Second Draw PPP Loan Forgiveness

What makes the second round of PPP payments – referred to as Second Draw loans – different from the first? Very little, actually. This second round of payouts was actually received by many of the business owners that received the first round.

Likewise, the rules for the forgiveness of these funds are the same as those for the first round. These are:

• Employee compensation levels were maintained for the period of 8-24 weeks after disbursement.
• Funds from the loan were spent on eligible expenses, such as payroll costs.
• At least 60% of total funds were exclusively put towards payroll.

Again, documentation will be required to receive forgiveness for these loan funds.

How Can You Know if Your Loans are Forgivable?

It is important to remember that loans taken privately during the coronavirus pandemic may not be eligible for the same forgiveness offered to those received through the Paycheck Protection Program. Determining whether your lender participates in this forgiveness program – and what type of loans you acquired during the time – can help you figure out whether your loans qualify.

While there are dates during which loan funds must have been received to qualify for forgiveness, such dates do not exist for terms of repayment. This means that while your business must have received funds from specific programs and during specific times, you may still be eligible to receive forgiveness for those funds even months or years later.

Rather, the maturity of the loan – or the use of all funds for appropriate purposes – is the guideline. The borrower has up to ten months from the time the loan reaches maturity to apply for forgiveness. If the application is not received within this period, deferment expires and repayment must begin. The United States government extended deferment several times, but this deferment period has since ended.

Applying for the forgiveness of Covid business loans requires careful attention to detail. Documentation of the loans and how they were used must be provided, and the proper forms must be used to submit the application for forgiveness successfully. After this application is submitted, applicants are responsible for monitoring the status of the application to determine whether forgiveness has been rendered.

Other programs are still available to help business owners who are struggling to repay Covid business loans. Be sure to speak with a financial professional to learn more about which options may be available to you.

The United States government provides online information, instruction, and forgiveness applications for those who are interested in learning more. However, this information may be confusing to many readers and has left many still questioning whether their business’s loans qualify. If you still have questions or doubts, your best option is always to speak with a qualified legal or financial professional.

Bankruptcy is a Viable Option

What should you do if you find that your Covid business loans are not forgivable? Are there still options for you that do not involve closing your business to offset the debt?

Thankfully there are – and at the Van Horn Law Group, our experienced team of bankruptcy lawyers wants to help you find them.

Bankruptcy might seem like a dramatic step at first glance. Most people think of bankruptcy as a last resort. But the process can actually help many people – especially business owners – regain control of their finances and enjoy more freedom and less stress.

Chapter 11 bankruptcy, in particular, may be a great option for those struggling to repay Covid business loans.

In Chapter 11 bankruptcy, business owners can prioritize the repayment of specific debts while negotiating the repayment of others. They can direct the frustrating calls and letters from lenders to their legal representatives and stop feeling bullied when it comes to repayment. Business owners may also be able to negotiate contracts that no longer serve their needs, release themselves from the burdensome property without dealing with liens, and much more!

If all of this sounds like it might be worth learning more about, our experienced team is here to help. With combined decades of service in South Florida communities just like yours, we have helped numerous businesses before, during, and after the pandemic to sort out their financial stresses and improve their companies’ futures. Whether you plan to seek forgiveness, need help navigating bankruptcy, or just don’t know where to begin, our team can help you at every step.

Don’t go it alone! Give us a call today to learn more about how we can help!