The Paycheck Protection Program (PPP) Has Ended. Now What?

The Paycheck Protection Program (PPP) officially ended on Monday, May 31, 2021, which means businesses are no longer able to apply for loans under the program. However, if your company received a PPP loan, now is the time to plan to apply for PPP loan forgiveness.

What is PPP Loan Forgiveness?

The PPP loan program allows businesses that received PPP loans to have the loans forgiven instead of having to repay the proceeds of the loan, provided you complied with certain conditions. Of course, there are eligibility and performance restrictions.

Eligibility Requirements and Restrictions

• Borrowers can apply for forgiveness at any time until the maturity date of the loan
  • Loans received before June 5, 2020, have a two-year maturity (unless borrower and lender mutually agree to extend the term to five years)
  • Loans received on or after June 5, 2020, have a five-year maturity
• Employee and compensation levels are maintained at the same level as when you applied for the loan
• At least 60% of the proceeds are spent on payroll costs
• Loan proceeds are spent on payroll costs and other eligible expenses
• The expenses paid with the proceeds must have been incurred within 8 to 24 weeks of receiving the loan proceeds

How do you know if you qualify for PPP forgiveness?

• Funds must be spent within 24 weeks of receipt of the loan proceeds (any funds not spent within the 24 weeks will not be forgiven)
• Full-time staff headcount must be maintained at the same level as when you applied for the loan
• Payroll costs also must be maintained at the same level as when you applied for the loan

How do you apply for PPP loan forgiveness?

Applications for PPP loan forgiveness should be sent to your lender, not directly to the SBA, and you need to submit one of the following forms:

• Form 3508S – for borrowers whose loan proceeds were $50,000 or less
• Form 3508EZ – if borrowers meet one of the criteria below
  • Borrower is self-employed, independent contractor, or sole proprietor with no employees at time of PPP application
  • Salaries/wages of employees were not reduced by more than 25% and employee hours were not reduced
  • The business experienced business reductions as a result of COVID-related restrictions and did not reduce employee wages by more than 25%
• Form 3508 – for borrowers that don’t meet the above qualifications

In addition to the forms, you will be required to submit documentation to verify payroll and non-payroll expenses, including bank statements, payroll reports, receipts, cancelled checks, invoices, account statements and more. The specifics of these are noted on the loan forgiveness application forms.

What expenses are eligible for forgiveness?

• Payroll costs (must be a minimum of 60% of the loan proceeds)
  • Salaries, wages, commissions
  • Employee benefits
  • State and local taxes on compensation
• Mortgage interest
• Rent
• Utilities
• Software
• Property damage related to civil unrest
• Necessary supplier costs
• COVID-related protective measures

PPP Loan Forgiveness Deadline

The PPP loan forgiveness application may be submitted any time before the maturity date of the loan (either two or five years from the loan origination date). However, in order for loan payments to be deferred, the application must be made within 10 months from the last day of the covered period. The covered period can be anywhere from eight to 24 weeks.

If, for example, your loan origination date was April 27, 2020, and you had a 24-week coverage period (until October 11, 2020), you need to apply for forgiveness no later than August 11, 2021, even though the maturity date is not until April 27, 2022, if you want to defer all loan payments. If you miss that deadline, you can still apply for loan forgiveness until the loan maturity date, but you will have to make some loan payments in the meantime.

Forgiveness Notification

The U. S. Small Business Administration (SBA) will remit any PPP loan forgiveness amount directly to the lender that provided the PPP loan. The lender is required to notify the borrower of the remitted amount. If the loan is not forgiven in full, the borrower is required to repay the remaining amount no later than the original maturity date of the loan (either two or five years). The lender is required to continue to service the loan and provide payment due dates do the borrower.

*To ensure that you meet all the criteria required of the PPP loan forgiveness program, check with your PPP lender.

Additional Resources:

SBA Loan Forgiveness Information

SBA PPP Loan Forgiveness FAQs

The forgoing is for informational purposes only and should not be taken as legal, tax or accounting advise. You should consult an attorney, accountant, or tax advisor and your lender for additional details and information.