If your business has fewer than 500 employees and meets other eligibility requirements from the Small Business Administration (SBA), you may have qualified for the Paycheck Protection Program (PPP) loans issued to businesses. Even better, if you received the PPP loans, you may be eligible for the forgiveness application. The SBA has approved a simple one-page PPP forgiveness application for businesses that received loans of $50,000 or less. Here is a quick overview of the PPP forgiveness application Form 3508S instruction for borrowers.

No More Calculations Required

The forgiveness application form does not include any calculations. All you need to do is prove that you used the loan towards eligible expenses. This includes providing evidence that you spent 60% of the loan on the payroll to pay salaries and wages. Businesses must provide statements and documents to indicate the amount spend on the payroll, all of which is expected to be forgiven. If you spent the entire loan to pay employees, you might have it all forgiven. However, businesses are allowed to use up to 40% of the loan towards other eligible costs, including rent, mortgage payments and utilities.

Extended Timeframe for Using PPP Loans

Initially, SBA required businesses to spend the loan within 8 weeks. However, the new requirement extended the period to 24 weeks, which is expected to create a significant shift in who can qualify for loan forgiveness. Most businesses that closed and reopened business could primarily be eligible for total PPP loan forgiveness considering the loan is determined and given based on 10 weeks (2.5 months) of pay slips. If they can prove the loan was spent on payroll costs, the PPP loan will surely be forgiven. However, there are other requirements to fulfill.

Simplified Documentation Requirements

Businesses applying for PPP loan forgiveness will not be expected to submit any complicated documents. Although you can submit quarterly tax form 941 that documents paid payrolls, it is not a requirement. The SBA only expects businesses to show the money coming from the business to the employees and business owner. This includes bank statements and canceled checks indicating payments from the company to the employee. Eligible payroll payments to the business owner are capped at $20,833. If you received an EIDL advance, SBA will deduct that amount from the total eligible forgiveness amount.

Things to Note

The PPP loan forgiveness application heavily relies on employee gross pay, which is the evidence needed to prove the loan was spent on payroll costs. As such, businesses should make sure they gather evidence for the gross payroll costs eligible for forgiveness. Employee checks usually contain amounts from which FICA and federal withholding taxes have been subtracted, which does not represent the gross pay. As such, it is vital to keep this in mind when gathering bank statements and employee checks.

Qualifying Businesses

If you spent 60% of the loan towards payroll cost and the other remaining 40% towards eligible expenses, you could apply for full loan forgiveness. However, you must also meet other requirements as follows:

  • You did not reduce total employee headcount by more than 25%
  • You did not reduce employee payments and rates by more than 25%
  • Your loan amount did not exceed $50,000

Those applying for PPP loan forgiveness should send the one-page application to the bank that originated the loan. The bank will have 60 days to review and approve the application then send it to the SBA. The SBA will take another 90 days to approve the application and send the amount to the bank paying off your loan. Stay in touch with the Salem Chamber for more valuable information about SBA PPP loans and programs.

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