How to Get Your PPP Loan Forgiven

If you’re one of the millions of Americans who have taken out a PPP loan , you may be wondering how you can get it forgiven. Here’s a step-by-step guide on how to do just that.

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Applying for PPP Loan Forgiveness

To apply for PPP loan forgiveness , you must submit a request to your lender. You will need to provide documentation supporting your loan forgiveness request, including your payroll records or other documentation showing how you spent the loan proceeds. The SBA will then review your application and make a determination on whether your loan can be forgiven.

Gather required documentation

To apply for forgiveness of your PPP loan, you (the borrower) must submit to the lender that is servicing your loan:
-A Loan Forgiveness Application, including Schedule A, which calculates the eligible forgiven amount;
– Documentation verifying the number of full-time equivalent (FTE) employees on payroll and pay rates for the covered period or alternative covered period; and
– Documentation verifying eligible mortgage interest, rent or utility payments; and
– Any other documentation the SBA requires.

Submit the required documentation

You will need to submit the following required documentation:
-A completed and signed Loan Forgiveness Application
-Documentation verifying the number of full-time equivalent (FTE) employees on payroll and pay rates for each, such as:
– Internal documentation from your payroll provider, signed by a representative of the business
– IRS payroll tax filings
– State income, payroll and unemployment insurance filings
-Documentation verifying eligible interest, mortgage payments, rent or lease payments, utility payments, and eligible wages and tips (see PPP Schedule A for more information) such as:
– Copies of canceled checks or bank statements documenting payment in amount and date; or alternatively, documentation establishing consistent payment pattern from your accounting records that contains all of the applicable information required in PPP Schedule A
– Copies of canceled checks or bank statements documenting payment in amount and date; or alternatively borrower paid invoices submitted to the lender that contain all of the applicable information required in PPP Schedule A
– Copies of canceled checks or bank statements documenting payment in amount and date; or alternative evidence from your accounting records that contains all of the applicable information required in PPP Schedule A
-If you are claiming the mortgage interest forgiveness, evidence of payment made to lender
-If you are claiming rent forgiveness, a copy of your lease agreement dated before February 15, 2020 as well as evidence of payment made to landlord
-If you are claiming utility forgiveness, evidence of service agreement dated before February 15, 2020 as well as evidence of payments made

Eligibility for PPP Loan Forgiveness

The first step in getting your PPP loan forgiven is to ensure that you are eligible for forgiveness. To be eligible, you must have used the loan for eligible expenses, which include payroll costs, mortgage interest, rent, and utilities. You must also have used at least 60% of the loan for payroll costs. If you have met these requirements, you can begin the process of applying for forgiveness.

Full-time equivalent employees

In order to have your PPP loan forgiven, you must maintain or rehire your full-time equivalent employees (FTEs) by December 31, 2020. You will also need to demonstrate that you have used at least 60% of the loan for payroll expenses.

If you have reduced the number of FTEs or salaries/wages during the covered period, you may still be eligible for partial loan forgiveness. The SBA will consider any reductions in FTEs or salaries/wages to be in good faith if:
-You are able to document an inability to rehire individuals who were employees as of February 15, 2020 and an inability to hire similarly qualified individuals for unfilled positions on or before December 31, 2020;
-You are able to document an inability to return to the same level of business activity as such business was operating at before February 15, 2020 due to compliance with guidelines established by HHS, CDC or OSHA related to COVID-19; or
-You have made a good faith, written offer of rehire made on or before December 31, 2020 to any employee who was employed as of February 15, 2020 and such offer was rejected.

Eligible expenses

To be eligible for forgiveness, PPP borrowers must use at least 60% of their loan on payroll expenses. Up to 40% of the forgiven amount may be used for eligible non-payroll expenses, including:
-Interest on mortgage obligations incurred before February 15, 2020
-Rent under a leasing agreement in force before February 15, 2020
-Payments on utilities incurred before February 15, 2020

Calculating Loan Forgiveness

The Paycheck Protection Program (PPP) loan forgiveness process can seem daunting, but it doesn’t have to be. To calculate your loan forgiveness amount, you’ll need to know your loan’s covered period, your eligible payroll costs, and your non-payroll expenses. You can also use the PPP Loan Forgiveness Calculator, which will do the calculations for you.

Full-time equivalent employees

To qualify for loan forgiveness, you must use at least 60% of your PPP loan for payroll expenses. You’ll also need to maintain or restore your full-time equivalent employees (FTEs).

To calculate your FTEs:
1. Add up the number of hours all your employees worked in the covered period, including part-time employees.
2. Divide that number by 2,080 (the number of hours in a full-time workweek). This will give you the total number of FTEs on your payroll during the covered period.
3. If you had any reductions in FTEs during the covered period, compare your average FTE employees from February 15 to June 30, 2019 to your average FTE employees from January 1 to February 29, 2020. Subtract the lower number from the higher number. This is the maximum amount of forgiveness that can be reduced due to a decrease in FTEs.

Eligible expenses

To have your PPP loan forgiven, you’ll need to document that you used it on eligible expenses.

According to the SBA, these include:
-Payroll costs
-Interest on mortgages
-Rent
-Utilities

You’ll need to keep records of your expenses and submit them to your lender when you apply for loan forgiveness. Make sure to save receipts, canceled checks or account statements. The SBA has a Forgiveness Application that you can use to submit your documentation.

You have until the maturity date of your loan to apply for forgiveness. For most loans, that’s two years from the date you got the money.

Applying for Loan Forgiveness

SBA Form 3508

SBA Form 3508 is the standard form for PPP loan forgiveness. To be eligible for forgiveness, you must use the loan proceeds for eligible expenses, as defined in the PPP regulations. These expenses include payroll costs, mortgage interest, rent, and utilities. You must also submit documentation verifying that you incurred these eligible expenses.

If you use the proceeds for any other purpose, or if you do not submit adequate documentation, your loan will not be forgiven. You will then be responsible for repaying the entire loan amount plus any accrued interest and fees.

To apply for forgiveness, you must complete SBA Form 3508 and submit it to your lender. You can find the form on the SBA website.

The form consists of four parts:

Part 1: Loan Information – This section asks for basic information about your loan, including the loan number, amount, and disbursement date.

Part 2: Calculating Loan Forgiveness – This section asks for information about how you used the loan proceeds and calculates the amount of loan forgiveness based on that information.

Part 3: Supporting Documentation – This section asks for documentation to verify your eligible expenses, such as payroll records or rent invoices. You must submit this documentation with your forgiveness application.

Part 4: Certification – In this section, you must certify that all of the information in your application is true and correct to the best of your knowledge.

SBA Form 3508EZ

The SBA Form 3508EZ is used for PPP borrowers that:

-Are self-employed with no employees; OR
-Did not reduce the salaries or wages of their employees by more than 25%, and did not reduce the number of hours of their employees; OR
-Experienced reductions in business activity as a result of health directives related to COVID-19; AND
-Are NOT seeking a loan increase.

If you meet all of the criteria above, you can apply for forgiveness using the SBA Form 3508EZ.