Update on PPP Loan Forgiveness
As the Paycheck Protection Program (PPP) has been in place for several months, recent updates and guidance have been released to provide clarification on applying for eligible PPP loan forgiveness. Those who received a PPP loan and used the proceeds to pay for qualified costs can now begin applying for loan forgiveness.
On October 8, 2020, the Small Business Administration released a new PPP loan forgiveness application (Form 3508S) specifically for small businesses that received a PPP loan of $50,000 or less. This application is designed to simplify applications for small businesses and allow lenders to process the loan forgiveness applications more easily.
If your business received a PPP loan of $50,000 or less and may qualify for loan forgiveness, please contact the lender that serviced your PPP loan once your covered period is complete to begin the loan forgiveness application. The application may require documentation such as payroll tax filings and cancelled checks, paid bills for mortgage, rent, and/or utilities. The lender is required to decide on the forgiveness of the loan within 60 days of receipt of the application.
If your business received a PPP loan over $50,000 and may qualify for loan forgiveness, you must apply for loan forgiveness using the SBA Form 3508, Form 3508EZ, or lender equivalent.
Form 3508EZ is another simplified application that requires fewer calculations and documentation than Form 3508. If you are a sole proprietor, independent contractor, or self-employed individual with no employees at the time of your PPP application, you must apply for loan forgiveness using SBA Form 3508EZ or a lender equivalent.
If your business did have employees at the time of your PPP application, you may also be able to use SBA Form 3508EZ to apply for loan forgiveness if you did not exceed certain limitations regarding employee salary and hour reductions.
The forgiveness application can be filed any time before the maturity date of the loan, which is either two or five years from loan origination (depending on the agreement); however, that approach requires the recipient to make payments during the interim period.
Note that if a portion of the loan will not qualify to be forgiven, the last date to apply for PPP loan forgiveness is 10 months after the end of the covered period (8 or 24 weeks from initial receipt of the loan). This timing is necessary in order to qualify for deferred loan payments on any portion of the loan that is not forgiven.
Please contact your representative at DKC if you have any questions.