Yes, you must pay back the SBA PPP loans you received. This is because they were made available by lenders, and not the Small Business Administration (SBA). This implies that lenders who released the money must get back their money to remain in business.
There may be reasons why you are unable to pay back your Paycheck Protection Program (PPP) loans when due, should you have such reasons, make sure you meet with your lender to get instructions on what to do. This is important because there are implications when you fail in paying back your PPP loans.
Here are the Implications You May Face When You Fail to Pay Back your PPP Loans
You May Not Be Able to Access Future PPP Loans
One of the implications is that you may not be able to access future PPP loans. Most lenders under the SBA Paycheck Protection Program may consider you not credit-worthy and they may not want to take the risk of granting you a loan. Apart from the fact that you will not have access to other business loans, it will be difficult for you to get goods on credit from your suppliers.
Your Credit Rating Will Drop
Failure to pay back your Paycheck Protection Program loans will affect your credit rating. In the United States and most countries, credit rating is a critical factor that will determine if you will be able to access a loan, or even if you are eligible, the interest rate will be way off the hook. This is why people try as much as possible to pay back their loans so that they can have access any time need for money arises.
Your Asset Can Be Seized
Another implication is that your property can be seized when you fail to pay back PPP loans. If you use any of your business assets or properties as a warranty for the loan, you may lose them to the lender. Note that some persons who are unable to pay back their PPP loans can be eligible for loan forgiveness.
All the Paycheck Protection Program loan forgiveness applicants, with the exception of those using the 3508S form, would be required to demonstrate how they invested their cash.
The evidence will include PPP-eligible payroll and non-payroll expenditure, as well as other documentation demonstrating how they utilized the loan to retain or hire new workers and also meet the requisite operational costs. Even when a forgiveness application doesn’t necessitate it, they must keep all records that complement their PPP loan eligibility.
It is important to note that the volume of forgiveness made available by the SBA is usually influenced by employee-related issues during the period of the Paycheck Protection Program loans, including how the funds were expended.
The program provides forgiveness to companies with workers who retain staff levels, does not decrease salaries by more than 25 percent for workers earning below $100,000 per year, and then uses at least 60 percent of overall cash to pay workers and personnel.
If you had used under 60 percent of your income to pay workers, you would also be qualified for forgiveness, but the part forgiven may be lowered.