Candace J. Dixon
You may be eligible for Paycheck Protection Program (PPP) loan forgiveness. You can apply for forgiveness once you have used all the loan proceeds at any time up to the maturity date of the loan. You need to apply within 10 months after the last day of the covered period or else your loan payments are no longer deferred, and you will have to start making payments to your lender.
Determine if You're Eligible for PPP Loan Forgiveness
Both First and Second Draw PPP loans qualify for full loan forgiveness if these conditions are met:
Employee and compensation levels were maintained (levels for Second Draw PPP loans have to be maintained the same way required for First Draw loans)
Loan proceeds were spent on payroll and other eligible expenses
At least 60% was spent on payroll costs during the 8 to 24 week covered period following disbursement of the loan
Don't include wages on your PPP loan forgiveness application that you paid between April 1, 2020 and December 31, 2021 if you used them for claiming the Employee Retention credit, as reporting them will affect the amount you can be use to claim the credits:
The Employee Retention Credit under section 2301 of the CARES Act, amended by sections 206 and 207 of the Taxpayer Certainty and Disaster Tax Relief Act
The Employee Retention Credit under section 3134 of the Internal Revenue Code enacted by the American Rescue Plan
More guidance is available from the IRS here:
Gather Your Documentation Depending on the Form You Have to Use
While SBA Form 3508S doesn't require you to provide documentation showing the calculations used to determine the amount of your loan forgiveness, the SBA might still request them if they review or audit your loan. This list is not all-inclusive.
Payroll (documentation for all payroll periods overlapping with your covered period. You can use third-party payroll service provider reports for cash compensation paid, filings, and reporting):
Bank statements documenting cash compensation paid
Payroll tax filings to the IRS, typically Form 941
State quarterly business and individual employee wage reporting
Unemployment insurance tax filings
Payment receipts, cancelled checks, or account statements showing employer contributions to employee health insurance and retirement plans that you included in your forgiveness amount
Non-payroll (for expenses incurred/paid during the covered period, showing that business mortgage interest, rent/lease and utility payment obligations/services existed prior to February 15, 2020):
Business mortgage interest payments: lender amortization schedule and receipts or lender account statements
Business rent or lease payments: current lease agreement and receipts or cancelled checks
Business utility payments: invoices and receipts, cancelled checks or account statements
Covered operations expenses: invoices, orders or purchase orders paid; and receipts, cancelled checks or account statements verifying payments
Covered property damage expenses: invoices, orders or purchase orders paid; receipts, cancelled checks or account statements verifying payments; and proof that costs were related to uninsured property damage that occurred in 2020 because of public disturbance, vandalism or looting
Covered supplier expenses: contracts, orders or purchase orders that were in effect any time before your covered period (except for perishable goods); invoices, orders or purchase orders paid; and receipts, cancelled checks or account statements verifying payments
Covered worker protection expenses: invoices, orders or purchase orders paid; receipts, cancelled checks or account statements verifying payments; and proof that the expenses were in compliance with COVID-19 guidance
Submit the Forgiveness Form and Documentation through the SBA Portal or Your Lender
Find out if your lender is participating in the SBA direct forgiveness program by checking with them or reviewing this SBA list of lenders participating in direct forgiveness and submit your application along with any required documents accordingly:
If your lender is participating in SBA direct forgiveness, you can use the SBA PPP Direct Forgiveness Portal to apply for forgiveness. The questions you'll be asked in the portal are the ones on the 3508S PPP Loan Forgiveness Application. If you need help, the SBA's forgiveness call center number is 877-552-2692, and their direct forgiveness knowledgebase has frequently asked questions.
If your lender is not participating in direct forgiveness, you'll have to apply for forgiveness through them using SBA Form 3508, SBA Form 3508EZ, SBA Form 3508S, or a form that they give you. Proactively ask your lender for any guidance they may have like forgiveness checklists, or FAQs on how to submit your application - don't wait for them to reach out to you. Some lenders, such as PNC, may have their own portals for you to use.
COVID Revenue Reduction Score
Second-draw PPP loans that are $150,000 or less will be given a COVID Revenue Reduction Score in the SBA’s loan forgiveness platform. This score will be visible to both borrowers submitting applications through the SBA Direct Forgiveness Portal, and to lenders as a way to document any revenue reduction.
If the score doesn't meet the value required to document revenue reduction and you didn't give documentation to your lender already, you'll need to provide the proof either directly to your lender or through the SBA Direct Forgiveness Portal, depending on whether or not your lender participates in SBA direct forgiveness.
Monitor Your Forgiveness Application.
Your lender is responsible for notifying you of the forgiveness amount that the SBA pays, and the date your first payment will be due, if necessary
Either the SBA or your lender will notify you if the SBA reviews your loan, and of any review decisions made. You'll have the right to appeal certain SBA loan review decisions.
Resources:
FAQ About PPP Loan Forgiveness
FAQ for PPP Borrowers and Lenders
SBA form 3508 PPP Loan Forgiveness Application + Instructions
SBA form 3508EZ PPP Loan Forgiveness Application + Instructions
SBA form 3508S PPP Loan Forgiveness Application + Instructions