The second round of the Paycheck Protection Program (PPP) is here. This 2021 emergency relief program has the goal of stimulating the economy and helping businesses maintain their operations through forgivable loans.
One of the most-asked questions regarding PPP loans is if they will be forgiven, like the first round. The short answer is yes and the good news is that the process has been simplified.
Forgiveness of a PPP loan can give business owners, employees, and the self-employed much needed relief to help ride the pandemic downturn.
PPP second round information
The official Paycheck Protection Program forgiveness application form originally release on May 15, 2020 has been updated. This is the form small businesses who received a PPP loan will submit to their PPP lender when it’s time to have their loan partially or entirely forgiven.
Here are answers to questions about this application to date. Please note that this information is provided for educational purposes only. You should consult with your accountant and lender with respect to actual program requirements.
Do I need to take action for PPP loan forgiveness?
Yes. You must apply for forgiveness with your PPP lender through the official PPP forgiveness application. The process isn’t automatic.
Any portion of the loan that is not forgiven will carry an interest rate of 1.0% and is due to be paid back within five years. However, payments are deferred for the first six months and there is no pre-payment penalty.
What are the new authorized uses of PPP loan proceeds for forgiveness?
Costs eligible for loan forgiveness in this round of the PPP, as with the last round, include payroll, rent, covered mortgage interest, and utilities. The new round makes the following potentially forgivable:
- Covered worker protection and facility modification expenditures, including personal protective equipment, to comply with COVID-19 federal health and safety guidelines.
- Expenditures to suppliers that are essential at the time of purchase to the recipient’s current operations.
- Covered operating costs such as software and cloud computing services and accounting needs.
- To be eligible for full loan forgiveness, PPP borrowers will have to spend no less than 60% of the funds on payroll over a covered period of either eight or 24 weeks.
How to apply for loan forgiveness
Here are steps to follow to make sure you get the forgiveness you qualify for.
1. Contact your PPP Lender and complete the correct form
The 3508EZ and the 3508S are shortened versions of the application for borrowers who meet specific requirements. Your Lender can provide further guidance on how to submit the application.
2. Compile your documentation
Payroll (provide documentation for all payroll periods that overlapped with the Covered Period or the Alternative Payroll Covered Period):
- Bank account statements or third-party payroll service provider reports documenting the amount of cash compensation paid to employees.
- Tax forms (or equivalent third-party payroll service provider reports) for the periods that overlap with the Covered Period or the Alternative Payroll Covered Period:
- Payroll tax filings reported, or that will be reported, to the IRS (typically, Form 941); and
- State quarterly business and individual employee wage reporting and unemployment insurance tax filings reported, or that will be reported, to the relevant state.
- Payment receipts, cancelled checks, or account statements documenting the amount of any employer contributions to employee health insurance and retirement plans that the borrower included in the forgiveness amount.
Non-payroll (for expenses that were incurred or paid during the covered period and showing that obligations or services existed prior to February 15, 2020):
- Business mortgage interest payments: Copy of lender amortization schedule and receipts verifying payments, or lender account statements.
- Business rent or lease payments: Copy of current lease agreement and receipts or cancelled checks verifying eligible payments.
- Business utility payments: Copies of invoices and receipts, cancelled checks or account statements.
This list of documents required to be submitted to the lender is not all-inclusive and may vary from lender to lender. Ask your PPP loan processor for specifics.
3. Submit the forgiveness form and documentation to your PPP lender
Complete your loan forgiveness application and submit it to your lender with the required supporting documents and follow up with your Lender to submit additional documentation as requested. Consult your Lender for additional guidance and provide requested documentation in a timely manner.
4. Continue to communicate with your lender throughout the process
If SBA undertakes a loan review of your loan, your lender will notify you of the review and the SBA loan review decision. You have the right to appeal certain SBA loan review decisions. Your lender is responsible for notifying you of the forgiveness amount paid by SBA and the date on which your first payment will be due, if applicable.
If applicable, SBA will deduct any EIDL advance amount you have received from the forgiveness amount remitted to the lender. Borrowers are required to retain certain documents for six years after the date the loan is forgiven or repaid in full.
What information is needed to complete the form?
Be sure to have the following information available before you start your forgiveness application:
- Your business’s legal name, DBA or trade name, and your business EIN or personal Social Security Number
- Your business address, phone number, primary contact, and email address
- Your SBA PPP Loan Number
- The lender’s PPP Loan Number
- The total number of employees you had when you applied for your PPP loan
- The total number of employees you have when applying for PPP loan forgiveness
- Your PPP loan disbursement date
- EIDL advance amount and application number (if applicable)
Additional information may be required by your lender.
What are important PPP forgiveness dates?
The SBA has not set a deadline to apply for forgiveness, but it’s expected that borrowers will have 10 months after the end of your covered period before you'll be required to start making monthly payments.
Keep in mind that the federal government may revise any of these dates.
Once you apply for loan forgiveness, your lender is required to respond to request with an answer within 60 days. Borrowers must maintain business records for 6 years after the date the loan is forgiven or repaid in full (all of which may be inspected by authorized representatives of the SBA, including its Office of Inspector General).
For more detailed questions and answers around specific application requirements, visit the U.S. Treasury Department’s PPP Forgiveness FAQs and updated guidance.
Let SmartBiz help you apply for the new round of the Paycheck Protection Program (PPP) with the banks in our network.
SmartBiz Loans® works with small business owners like you every day to help you apply for the funding you need. Since 2013, we’ve specialized in SBA (Small Business Administration) loans. The new round of this Continuing Paycheck Protection Program Act, to be administered by the SBA, makes continued financial support available to help eligible small businesses keep their employees and stay open safely during the COVID-19 pandemic.
Start a PPP application with SmartBiz Loans here.
What you need to know
The SmartBiz® Small Business Blog and other related communications from SmartBiz Loans® are intended to provide general information on relevant topics for managing small businesses. Be aware that this is not a comprehensive analysis of the subject matter covered and is not intended to provide specific recommendations to you or your business with respect to the matters addressed. Please consult legal and financial professionals, and the applicable SBA rules, for further information. The availability of PPP loans remains subject to Congressional and SBA approval, including the amount of funding available to banks and the quantity of eligible applicants considered on a first-come, first-served basis. The information provided is based on laws, rules, regulations, and related guidance with respect to the Paycheck Protection Program (PPP), including guidance issued by the U.S. Small Business Administration (SBA). In the event of any discrepancies between the information on this site and the SBA’s site, please follow official SBA guidance.