PPP Loan Forgiveness Application

Is there anything that feels better than relieving the weight of a loan from one’s financial plate? For many Paycheck Protection Program (PPP) loan recipients, when applying for and receiving these loans, the potential and seemingly easy process to receive forgiveness was a primary appeal for applying. Now that many businesses have received their PPP loans and funds have been allocated, the next step is to ensure one qualifies for forgiveness and apply to avoid having to repay these loans.

As the pandemic drags on and Congress mulls additional supportive actions, the information below is subject to change. However, the principles and processes of loan forgiveness are likely to remain somewhat consistent. So as of today, here is what we know about how to qualify and apply for loan forgiveness.

Qualifying for loan forgiveness

Before applying for loan forgiveness, it is a good idea to review the qualifications with your client to ensure their situation has not changed.

• Eligible payroll – must be at least 60% of forgiveness amount
• Eligible non-payroll – cannot exceed 40% of forgiveness amount
  • Mortgage interest (liability incurred before Feb. 15, 2020)
  • Rent (lease in effect before Feb. 15, 2020)
  • Utilities (service that began before Feb. 15, 2020)

    * Electricity 
    * Gas 
    * Water 
    * Telephone 
    * Transportation 
    * Internet access 

Applying for loan forgiveness

It is important to note that at the time of this writing, the Paycheck Protection Small Business Forgiveness Act is under consideration in Congress. If this is signed into law, as it currently sits, small businesses with PPP loans of $150,000 or less will qualify to file a one-page form.

To apply for forgiveness, you need to complete SBA Form 3508 or SBA Form 3508EZ. Do note, the version used as of this writing is dated June 16, 2020, with an expiration of Oct. 31, 2020, and could see further modifications as this pandemic drags on and/or Congress takes further action. Since completing the long form exceeds the EZ form, we will focus our attention on the long form so you are prepared for both. Additionally, having a copy of the SBA Form 2483, Paycheck Protection Program Borrower Application Form, will also be handy in completing the loan forgiveness forms.

That being said, let’s dive in.

The SBA Form 3508 is a five-page form. We will take a look by page to give you a general overview.

Page 1

Page 1 can be broken down into three sections. The top portion is just what you would expect – business name, tax ID, phone, etc. The second portion is the client’s PPP loan details – loan number, amount, lender, employees at time of the loan, number of employees at time of forgiveness application, etc.

The third and final section of page 1 is the actual forgiveness calculation. Just like Forms 1120 or 1040, the front page is the final resting spot of the results of the other pages of this form. To complete this section, you first need to complete PPP Schedule A, which encompasses page 3 (PPP Schedule A) and page 4 (PPP Schedule A Worksheet).

Page 2

Page 2 is to be completed by the authorized representative of the client. It is a series of representations and certifications that are affirmed by the representative by initialing each line.

Page 3

Page 3 is the PPP Schedule A. Information from the PPP Schedule A flows back to page 1 to determine the loan forgiveness amount. You will want to complete page 4 of the PPP Schedule A Worksheet before completing this page.

Page 4

Page 4 is the PPP Schedule A Worksheet, which feeds much of the PPP Schedule A. You may want to start by completing this page. This worksheet contains three parts, Table 1, Table 2 and FTE Reduction Safe Harbor 2. Tables 1 and 2 are very similar. Both tables are for entering information regarding employee’s compensation information. Name, employee ID, compensation, and average FTE are used by both tables. Table 1 also has a section for salary/hourly wage reduction. The other difference is that Table 1 relates to employees who were not employed in 2019 or were paid at an annualized rate of $100,000 or less. Table 2 is for employees whose annualized compensation exceeds $100,000 for any pay period in 2019.

Page 5

Page 5 is for demographic tracking and statistical analysis. Completion of this section is voluntary. This page is looking for information regarding the business principal’s race, sex and veteran status.

Finally, there are two key things to remember about this form. First, once completed, the SBA Form 3508 is to be submitted to the lender. The lender will determine eligibility of forgiveness and make the final decision on if a loan will or will not be forgiven, and how much is actually forgiven. To determine how to submit the form, you will want to review each specific lender’s options.

Second, this form, as it sits today, has an expiration date of Oct. 31, 2020. We can only assume this means some further adjustment is very possible, as the forgiveness program runs through Dec. 31, 2020. At a minimum, there will be a future update to change this expiration date. However, as we previously stated with the pandemic carrying on and as Congress mulls further action, things could change at any time. NATP will continue to keep you up to date on this ever-changing, highly fluid situation.