Paycheck Protection Program Forgiveness Application Guidelines

PPP loans have the goal of stimulating the economy and helping businesses maintain their operations. Forgiveness of a PPP loan can give business owners and the self-employed much needed relief to help ride the downturn related to the pandemic.

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The SBA and the Treasury Department released the official Paycheck Protection Program forgiveness application form on May 15, 2020 and updated guidance on May 22, 2020. 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 loan 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 two years. However, payments are deferred for the first six months and there is no pre-payment penalty.

What are the authorized uses of PPP loan proceeds for forgiveness?

  • Payroll costs (capped at $100,000 on an annualized basis for each employee)
  • Costs related to the continuation of group health care benefits during periods of paid sick, family, or medical leave, and insurance premiums
  • Payments of interest on any mortgage obligation (principal payments are excluded) incurred before February 15, 2020
  • Rent payments, under lease agreements that were in effect before February 15, 2020
  • Utilities, for which service began before February 15, 2020
  • Servicing interest on other debt obligations incurred before February 15, 2020; and
  • Refinancing an SBA Economic Injury Disaster Loan made between January 31, 2020, and April 3, 2020

Where can I get a PPP forgiveness application?

This form application, known as SBA Form 3508, is what small business borrowers must submit to their PPP lender for forgiveness. You can download the 11-page PDF form here. However, you might want to check with your lender to see if they provide a digital alternative you can fill out online.

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.

How do I fill out SBA form 3508 for PPP forgiveness?

Form 3508 is an 11-page application with four sections:

PPP Loan Forgiveness Calculation Form

  1. Track total eligible costs incurred and paid during the 8-week period following the loan funding
  2. Calculate any reduction in payroll > 25% of prior quarter
  3. Calculate any % decrease in FTEs from 8-week covered period versus the following periods: February 15 through June 30, 2019 or, at the borrower’s election, January 1 through February 29, 2020. Seasonal businesses will use February 15 to June 30, 2019; between January 1 and February 29, 2020 or any consecutive 12-week period between May 1, 2019 and September 15, 2019
  4. Calculate any adjustment because FTEs and salary/wages were restored by June 30. If “restore” criteria are met, the decreases in loan forgiveness calculated in steps 3 and 4 are ignored.
  5. Calculate payroll costs for forgiveness floor.

More detailed information is available through the American Institute of Certified Public Accountants fact sheet.

PPP Schedule A

Schedule A is to determine your payroll and compensation costs. Self-employed individuals without payroll only need to complete Lines 9 and 10, and ignore the rest.

One of the big provisions in the new forgiveness application gives flexibility for businesses who received the loan in the middle of a pay period. Businesses are now able to use an "alternative payroll covered period" for those with a biweekly (or weekly) payroll schedule over the eight-week period, and can elect to calculate "eligible payroll costs" using the first pay period after they got the PPP funds, per the application.

PPP Schedule A Worksheet

The instructions for PPP Schedule A Worksheet provide detailed steps to calculate any wage-based reduction to forgiveness. The calculation is based on each individual employee who is employed during the Covered Period (or the Alternative Covered Period) and who received compensation in 2019. Self-employed individuals without payroll can ignore the worksheet, and proceed to Schedule A. Check with your payroll system or payroll processor to see if they can provide this information.

PPP Borrower Demographic Information Form

This form is optional. Veteran/gender/race/ethnicity data is collected about each of the Borrower’s Principals for program reporting purposes only.

Are there other documents needed when submitting Form 3508?

Supporting documents for the PPP forgiveness application are:

  • Payroll details
  • Number of full-time equivalent employees
    The calculation of full-time equivalent (FTE) is an employee's scheduled hours divided by the employer's hours for a full-time workweek. When an employer has a 40-hour workweek, employees who are scheduled to work 40 hours per week are 1.0 FTEs.
  • Payroll tax filings (typically Form 941)
  • State quarterly business and individual employee wage reporting
  • Unemployment insurance tax filings reported or that will be reported to the relevant state.
  • Non-Payroll Expenses
    To verify the other forgivable costs outside of non-payroll costs, submit proof of payments of business mortgage interest payments, business rent or lease payments, and/or business utility payments.

NOTE: Documents submitted may cover periods longer than the specific time period. Additional information may be required by your lender.

What are important PPP forgiveness dates?

Here are important dates. 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 its updated guidance.