PPP Loan Forgiveness
We know that loan forgiveness is important to you and your business.
The entire amount of your PPP loan, plus accrued interest, could be forgiven, but it is important for you to know that loan forgiveness is not automatic.
Forgiveness is based on the employer maintaining or quickly rehiring employees and maintaining salary levels. Forgiveness will be reduced if full-time headcount declines, or if salaries and wages decrease.
How to Apply for Forgiveness
The SBA has provided application forms and instructions to guide borrowers on how to apply for forgiveness of their PPP loans.
To help your business best prepare for the forgiveness process:
- Review the applications and decide which best fits your situation.
- Begin gathering required information.
SBA loan forgiveness forms and instructions now include:
- Options for borrowers to calculate payroll costs using an “alternative payroll covered period” that aligns with your regular payroll cycles
- Flexibility to include eligible payroll and non-payroll expenses paid or incurred during the 8-week or 24-week period after receiving your PPP loan
- Step-by-step instructions on how to perform the calculations required by the CARES Act to confirm eligibility for loan forgiveness
- Addition of a new exemption from the loan forgiveness reduction for borrowers who have made a good-faith, written offer to rehire workers that was declined
For PPP loans of $150,000 or less, borrowers should use form 3508S. This simplified form requires basic calculations and attestation, but does not require the borrower to submit supporting documents with the application. Please note the SBA requires borrowers to maintain documentation of the use of PPP proceeds for 6 years and may request those documents at any time during that period.
For PPP loans over $150,000, the SBA has supplied two forms.
The standard forgiveness application (form 3508) includes a PPP Loan Forgiveness Calculation Form and other additional forms you need.
There is also a more simplified version called the Forgiveness EZ application (form 3508 EZ) if your business has met ONE of the following requirements:
- Applied for the PPP loan as self-employed, an independent contractor or a sole proprietor with no employees
- Did not reduce salary or wages for any employee by more than 25% and did not reduce the number or hours of their employees (excepting laid-off employees who refused an offer to return)
- Did not reduce salary or wages for any employee by more than 25% during the covered period and experienced reductions in business activity as a result of health directives related to COVID-19