The Five Key Points to PPP Loan Forgiveness

Much needed business loans, PPP loans, were given out during the COVID-19 stimulus period. But now that we’re no longer seeing stimulus checks and loans handed out, it’s time to think about how to pay off or get those loans forgiven. 

Here are five key points to help you get your PPP loan forgiven.

1. Know What Form to Fill Out

There are two forms to consider when you begin your journey to loan forgiveness: SBA PPP Loan Forgiveness Application Form 3508EZ or Form 3508. There are a few things to note about these forms that can make your life easier when filing for forgiveness.

• Form 3508EZ is preferred (if the borrower is eligible) because it’s much easier to fill out and gives your lender less options to challenge when you file for forgiveness.
• Form 3508EZ does, however, eliminate All Full Time Employment (FTE) and Wage, reduction calculations such as Documentation of FTE and Wage Reductions and Forgiveness “Haircuts.”

If you’re not sure what any of this means, that’s okay, too! Reach out to your CPA or Accountant to learn more about what you can do to take the first step to loan forgiveness.

2. Know If You’re Eligible to File Form 3508EZ

Borrowers only need to meet one of the 3 standards set to qualify for Form 3508EZ. Here are the 3 standards!

• Sole Proprietorship's: No employees when you filed for the PPP loan.
• No Wage Reductions Greater than 25% (don’t worry about employees who make over $100,000/year) and No FTE Reduction Between 01/01/20 and end of covered period.
• No Wage Reductions Greater than 25% (don’t worry about employees who make over $100,000/year) and Could Not Operate at the Same Levels Before due to CDC/HHS/OSHA guidelines.

3. Know What Forgivable Costs are Eligible

Certain Payroll and Non Payroll costs are eligible for forgiveness. These costs can be either paid or incurred during the covered period of time. Here are a few of the forgivable costs listed:

Payroll Costs: At least 60% of the loan was used for salaries, wages, commissions, and certain employee benefits.

Covered Non Payroll Costs: Things like Mortgage Interest, Rent, and Utilities.

4. Choosing Between the 8 week or 24 week cover periods.

When it comes to PPP loan forgiveness, you have the option to choose between the 8 or 24 week cover periods. Choosing the 24-week cover period gives you the time you need to address any “haircut issues” related to FTE or Wage Reductions, as well as give you more opportunity to get more forgivable costs covered. This is ideal if you’re looking for full loan forgiveness. The 8-week period is only available for companies who borrowed money using PPP loans prior to June 5, 2020.

5. Understand Forgiveness “Haircuts.”

  If you’ve received and used money from a PPP Loan, it’s important to know that you may not get your whole loan forgiven if you don’t address Full Time Employment (FTE) and Wage Reduction issues. To avoid having these issues here are a few things you can do to avoid Forgiveness “Haircuts.”

• Think about spending more than the original PPP Loan received on forgivable costs in an effort to offset any forgiveness haircuts.
• Restore the original Full Time Employment and Wages before December 31, 2020 or before the date of the submitted loan forgiveness application.
• See if you are able to waive any “haircuts” due to changes in your business activity. Take a look at The PPP Flexibility Act.

Getting Your PPP Loan Forgiven

Getting your PPP Loan forgiven can seem impossible if you don’t know what to do, but you can easily get the help of a CPA or Accountant to start your loan forgiveness process. If you need help or assistance to understand what you need to get started with PPP Loan Forgiveness, you can give me a shout here on LinkedIn or via email at [email protected] !