It’s Time to Apply for PPP Loan Forgiveness

If you received a Paycheck Protection Program (PPP) loan and you have already spent your First or Second Draw funds, it’s time to apply for PPP loan forgiveness. Depending on which draw you received, there are a few things you should know.

First Draw PPP loan recipients qualify for full loan forgiveness if they meet the following criteria:

  • Staffing and compensation levels stayed the same during the covered period.
  • At least 60% of the loan was used for payroll costs.
  • The other 40% was used for eligible expenses.

Second Draw PPP loans have similar criteria for full forgiveness:

  • Staffing and compensation levels stayed the same during the covered period, as with First Draw loans.
  • At least 60% of the loan was used for payroll costs.
  • The other 40% was used for eligible expenses.

Borrowers can apply for forgiveness as soon as all the loan proceeds from that period have been spent up until the loan’s maturity date. It is important to note that you must apply for forgiveness within 10 months of the end of the covered period or the loan will no longer be eligible for forgiveness.

If you are applying for loan forgiveness, you may want to keep the following details in mind as you begin the application process:

  • Contact your lender to begin the process.
  • Use SBA Form 3508, SBA Form 3508S, or SBA Form 3508EZ.
  • To start the application, you will need your name, address, EIN, SBA PPP loan number and lender PPP loan number.
  • Keep the following information on hand for the informational section: PPP loan amount, disbursement date, number of employees at time of application, number of employees at time of forgiveness application, EIDL advance amount, EIDL application number, payroll schedule, covered period–keep in mind that the PPPFA extended the covered period to a default of 24-weeks, but borrowers who receive a loan prior to June 5 can elect to use the original 8-week covered period instead–alternative payroll covered period, if applicable
  • Schedule A and the accompanying worksheet are critical support documents and will be used to fill out the forgiveness application.
  • If you borrowed less than $2 million, DO NOT check the box that indicates, “If Borrower (together with affiliates, if applicable) received PPP loans in excess of $2 million, check the box.” Borrowers above the $2 million mark will be subjected to additional scrutiny when applying for loan forgiveness.

Full instructions for applying for PPP loan forgiveness are available at SBA.gov.

The professionals at Harris, Hardy & Johnstone, P.C. are here to assist you. Please contact us with any questions.