PPP Loan Forgiveness

On the evening of December 21, Congress adopted major changes in the PPP loan program, including streamling the forgiveness process for loans under $150,000.  The description of forgiveness below applies to the old law and to forgiveness applicactions filed before December 29, 2020, the effective date of the new law.

The SBA will not be ready to accept streamlined forgiveness applications until later in Jaunary 2021.  We have removed the links to forgiveness applications pending SBA publishing new forms and instructions.

Summary:

  1. Borrowers that elect an 8-week Covered Period are eligible to file for forgiveness for loans disbursed before June 5.
  2. As of October 19, all borrowers are eligible to file for forgiveness for loans disbursed before May 5 (this is a "rolling" 24-week Coverage Period after the loan disbursement date).
  3. Once the new law becomes effective, borrowers with loans of $150,000 or less are eligible to use the new streamlined process for which the form has not yet been published. Borrowers with loans above $50,000 must use forms 3508EZ or 3508.  There are two different application paths:  one for loans below $150,000 and the second for loans above $150,000.  See below for information on the two paths.
  4. If you are not yet eligible to file a forgiveness application, you are encouraged to download the instructions and see what information and documents will be required to file the application.
  5. If you do not file an application and receive approval for forgiveness, you will have to begin the repayment process after the Deferral Period.
  6. The PPP Flexibility Act automatically extended the Deferral Period - it now ends 12 or 16 months after the disbursement date of the loan, regardless of what may be stated in the Note.  Your lender may or may not ask you to sign a new Note with this revision.

One of the most beneficial aspects of the PPP loan program is the opportunity to have 100% of the loan, and any accrued interest, forgiven.  The outcome of the PPP forgiveness is that the borrower has received a TAX-FREE GRANT FROM THE SBA.

Any amount of the loan that is not forgiven must be repaid by the borrower plus interest over an approximately 18 months period, if the loan was made before June 5, or approximately a four-year plus period if the loan was made after June 5.

The information provided in these web pages is intended to be a summary guide to the PPP forgiveness program and provide a roadmap for borrowers on the process of filing.  This information does not replace the specific instructions from the SBA, links to which are provided below, or the advice of accounting or legal professionals that may be required.  This site does not provide legal or accounting advice.  You are responsible for the correct content of your forgiveness application.  These web pages will provide the links to the online forgiveness applications you are required to use if you obtained your PPP loan through a lender using PPP-Apply. (See information on the forgiveness application forms below.)

General Information on Forgiveness Under the Current PPP Statue and Regulations

Up to 100% of the loan amount can be forgiven if the borrower has, during the “Covered Period,” spent the funds for allowable expenses, including:

  1. Payroll expenses including direct payments (with limits) to employees and owners and certain employee benefits.
  2. Business mortgage interest payments for real or personal property on obligations incurred before February 15, 2020.
  3. Rent or lease payments for real or personal property on obligations incurred before February 15, 2020.
  4. Business utility payments for services that began before February 15, 2020.

The “Covered Period” generally means up a specific number of weeks beginning on the date funds were disbursed to the borrower.  There is flexibility in when this period starts to match when actual payroll periods start, called the “Alternative Payroll Covered Period.”  The number of in the Covered Period depends on the you received the disbursement of the loan:

  1. If the loan was disbursed before June 5, 2020, the number of weeks is, at the option of the borrower, either (i) 8 weeks (56 days) or (ii) 24 weeks (168 days) not to extend beyond December 31, 2020.
  2. If the loan was disbursed on or after June 5, 2020, the number of weeks is 24 (168 days) not to extend beyond December 31, 2020.

Documentation must be available and kept for three years on the amounts actually spent during the Covered Period.  For #2 through #4 documentation that the obligations existed before February 15, 2020, must also be provided, to the extent that any of those expenses were claimed for forgiveness.  For example, if all forgiveness amounts are claimed for payroll expenses, no documentation is required with respect of #2 through #4.  (Note that there are limitation on how much "payroll" can be expensed for self-employed borrowers.)

No more than 40% of the forgiveness amount can be for expenses in #2 through #4.

There are specific definitions and limitations that apply to the allowed four categories of expenses listed above, which are explained in the SBA instructions. 

The most complex set of instructions for loans over $150,000 relate to the limitations on forgiveness that apply to a borrower that has reduced payroll or the number of employees by more than 25%, and not made up that reduction by rehiring within defined periods.

The borrower may need to consult appropriate professional accounting or legal advice in making that determination.

Neither we nor your lender can provide legal, accounting, or tax advice on which form to use or how to determine the calculation of any employee or payroll reductions. 

When to Apply for Forgiveness

You cannot apply for forgiveness until after the end of the Covered Period.

For loans of $150,000 and below

For instructions on loans of $150,000 or below, please click here.

For loans of above $150,000

Six Steps to Apply for Forgiveness on Loans Above $150,000.

In order to have the loan above $150,000 forgiven, a borrower must take five steps, 1 to 6, listed below.  These steps must be done carefully in order to receive the forgiveness.  If any part of the loan is not forgiven, you will be responsible for repaying that amount, plus interest.  PLEASE READ AND FOLLOW THESE INSTRUCTIONS CAREFULLY and the process will go smoothly.  The five steps are:

  1. Download the SBA Instructions for forms 3508 and 3508EZ.  (See link below.)
  2. Determine whether you are eligible to file the 3508EZ form or must use the 3508 form. Even if you are eligible to file the form 3508EZ, if you have employees you will find the Schedule A of form 3508 to be useful, even if you do not have to file it.
  3. File the appropriate Forgiveness Application form to request forgiveness with the lender that made the loan. If you received your loan as a result of applying through PPP-Apply.com (this website), then the Forgiveness Application must be filed through this website.  DO NOT FILE THE FORGIVENESS APPLICATION DIRECTLY WITH THE LENDER.
  4. Sign the Forgiveness Application and certify that (a) the information in the application, (b) the supporting documentation provided with the application, and (c) the supporting documentation you are required to maintain, but not file with the application, are all true and correct. Providing false information and documentation is a federal crime subject to severe civil and criminal penalties.
  5. When you are ready to file the 3508EZ or 3508 form, email ppp-forgiveness@paymentsecurity.net a request a secure upload link.  DO NOT EMAIL THE FORGIVENESS APPLICATION NOR THE SUPPORTING DOCUMENTS.  This secure link is only for 3508EZ and 3508 forms.  (If your loan is for $150,000 or less, use the link above for instructions.) 
  6. Maintain for a period of six-years any of the documentation not required to be filed with the Forgiveness Application but required to be maintained by the borrower for inspection by SBA or others. (See the SBA instructions for further information.)

The 3508EZ and 3508 Forgiveness Application Forms

The online link to the SBA site for the most current 3508EZ and 3508 forgiveness application forms and instructions is provided below.  Please download these forms and instructions and follow the six steps listed above to complete and file the 3508EZ or 3508 form with supporting documents.