PPP Loan Forgiveness


(PLEASE NOTE: PPP Loan info changes regularly. For the most up to date info, please visit the SBA website.)


The Paycheck Protection Program (PPP) was introduced to help businesses with payroll expenses. It was introduced with an aim to keep the employment opportunities running. If you had applied for a PPP loan and maintained certain conditions, you can apply for loan forgiveness.


When you apply for a PPP loan forgiveness, your lender can approve the loan forgiveness in full, part, or none. You can also appeal with the SBA if you do not like your lender’s decision.


Requirements for the PPP Loan Forgiveness

Your small business must fulfill certain conditions to be eligible for PPP loan forgiveness.


Maintaining Employee and Compensation Levels

The foremost condition for the PPP loan forgiveness is employee retention. If your business has employed the same number of employees as at the time of loan application, you’ll tick the condition. Employees rejecting the rehiring offers from your side do not count in the employee reduction.


Also, you’ll need to maintain the same employee compensation levels. If you reduce the employee wages and benefits, your PPP loan forgiveness will be adjusted proportionally. You must keep the employee wages by at least 75% of the ratio as at the time of PPP loan application. Employees requesting reduced hours do not count on the reduction on your side.


Loan Spent on Payroll Expenses

Broadly categorizing the payroll expenses, you must spend at least 60% of the PPP loan amount on the payroll expenses. The allocation is a reduced one from 75% previously. You can spend the remaining 40% of the PPP loan amount on certain business expenses.


If you seek a full PPP loan forgiveness, you must spend 60% of the loan amount on payroll expenses. The remaining 40% of the loan amount can be spent on the following expenses:

  • Additional wages and payroll expenses.

  • Rent and Utilities.

  • Mortgage Interest.

  • Personal Protective Equipment expenses to cope with the Covid-19 health and safety issues.

Loan Spent within the allocated time frame

Your small business must spend the PPP Loan amount within 8 months or 24 months. You can decide on the loan amount allocation even after the approval. You may decide once your loan amount is approved for a clearer strategy. The SBA does not imply any restrictions on choosing the timeframe, you can choose the loan spending time that best matches your loan forgiveness chances.


Documents Required for the PPP Loan forgiveness Application

You can apply for the PPP loan forgiveness only after you have spent the loan amount. You can however apply up to the loan maturity period. For a loan of less than $ 150,000, you’ll not need complicated documentation. However, PPP loans above $ 150,000 would require to submit a specific set of documentation.


You’ll first need to fill out the correct form by contacting your lender. You'll either need to fill the SBA Form 3508, SBA Form 3508 ZE, or SBA Form 3508 S.


Further, you’ll need to provide two types of relevant records.


Payroll Related Documents

You'll need to provide the payroll expense records for the covered period under the PPP loan program.

  • Bank account statements, cash proceeds, or third-party payroll service provider records showing employee payroll records.

  • IRS tax forms for your small business.

  • Payroll Tax forms such as Form 941. Tax filing reports or taxes to be filed with the IRS.

  • State quarterly wages and compensation reports, unemployment insurance reports for the payments made or to be made within the loan covered period.

  • Payment receipts or bank statements for the employee retirement and health insurance contributions.

Non-Payroll Expense Records

As you can utilize the PPP loan amount up to 40% on non-payroll expenses, you’ll need to provide the records for these expenses as well.

  • Statement or records for Mortgage Interest payments during the loan period.

  • Records for business rent or lease payments.

  • Copies of receipts for business utility payments such as invoices, receipts, or statements.

What if your PPP loan Forgiveness Application is Rejected?

Once you have compiled the necessary documentation and fulfilled the relevant application form, you can submit it to the lender. Your lender will make an assessment on the loan forgiveness application. You can communicate with your lender through the process. Your lender will decide on the application within 60 days. If you are not satisfied with the decision, you can appeal with the SBA for reconsideration. Your application may be approved for full, partial, or no forgiveness.



9 views0 comments