Paycheck Protection Program (PPP)
The Paycheck Protection Program (PPP) through the U.S. Small Business Administration (SBA) is a lending program designed to provide a direct incentive for small businesses that have been affected by the COVID-19 pandemic to keep their workers on the payroll. The program was available to U.S. businesses, including sole proprietors, self-employed individuals, independent contractors and nonprofits, who meet the SBA loan criteria. The PPP launched in April 2020 and ended on May 31, 2021. Existing borrowers may be eligible for PPP loan forgiveness.
PPP Loan Forgiveness
One aspect of the loan that is especially appealing for businesses is the loan forgiveness. Businesses can qualify for loan forgiveness for amounts used for payroll costs, mortgage interest, and rent and utility payments during the covered period, if the following criteria are satisfied.
First Draw PPP Loans made to eligible borrowers qualify for full loan forgiveness if during the 8-to 24-week covered period following loan disbursement:
- Employee and compensation levels are maintained;
- The loan proceeds are spent on payroll costs and other eligible expenses; and
- At least 60 percent of the proceeds are spent on payroll costs.
Second Draw PPP Loans made to eligible borrowers qualify for full loan forgiveness if during the 8-to 24-week covered period following loan disbursement:
- Employee and compensation levels are maintained in the same manner as required for the First Draw PPP loan
- The loan proceeds are spent on payroll costs and other eligible expenses; and
- At least 60 percent of the proceeds are spent on payroll costs
Maximizing PPP Loan Forgiveness
After receiving a PPP loan, it’s time to start thinking about how to use the loan to receive full PPP loan forgiveness. Meeting the requirements for forgiveness is key, and it is imperative to have meticulous accounting and documentation of the spending of PPP funds to help make certain you receive the greatest loan forgiveness potential. Our PPP loan experts can help to ensure you receive the maximum forgiveness. Contact us today.
Applying for Loan Forgiveness
A borrower can apply for forgiveness once all loan proceeds for which the borrower is requesting forgiveness have been used. Borrowers can apply for forgiveness any time up to the maturity date of the loan. If borrowers do not apply for forgiveness within 10 months after the last day of the covered period, then PPP loan payments are no longer deferred and borrowers will begin making loan payments to their PPP lender.
To apply for loan forgiveness, use either SBA Form 3508, SBA Form 3508EZ, SBA Form 3508S or a Lender equivalent. The 3508EZ and the 3508S are shortened versions of the application for borrowers who meet specific requirements.
Paycheck Protection Program Loan Forgiveness Application and Instructions
- Form 3508: All borrowers; borrowers who do not qualify to use Form 3508EZ or 3508S
- Form 3508EZ: Borrowers who did not reduce employee levels, wages or hours
- Form 3508S: Borrowers who took out loans of $150,000 or less
- FAQ About PPP Loan Forgiveness
We Can Help
We recognize that navigating through all the information and understanding the process of tracking the spending of your PPP funds can be complicated and overwhelming. Our experts have remained up to date on the provisions affecting the Paycheck Protection Program, and have developed key strategies around these provisions. We can assist you by providing clarity and direction so that you maximize your loan forgiveness. Contact your Dannible & McKee professional today.
Additional Insights
For additional information on the Paycheck Protection Program and other COVID-19 related topics, visit our Coronavirus Resource Center.