About PPP Loan Forgiveness

The Federal Paycheck Protection Program (PPP) is a forgivable loan offered by the U.S. Small Business Administration to help small businesses and non-profits with under 500 U.S.-based employees make payroll, even if their revenue is drastically reduced due to the pandemic. To be eligible, the owner must have been in business as of February 15, 2020 and have a U.S.-based workforce.

In 2021, the Paycheck Protection Program simplified the forgiveness process for smaller loans up to $150,000 and expanded the kinds of expenses that are eligible for forgiveness.

Jenka Rojas Real Estate, Lawrence, MA

Jenka Rojas, who launched her real estate business in 2017, applied for and secured two PPP loans to keep her business afloat with support from MEPPPAI partners Mill Cities Community Investments (MCCI) & Reading Cooperative Bank. Her first PPP loan was 100% forgiven and she is confident the second will be as well.

“Aaron [of MCCI] guided me through the whole process and for the forgiveness application. I attended one of MCCI’s webinars, and they were able to answer my questions and explain the steps I had to take to request it. Soon after I applied for forgiveness, it was approved.”

4U Bridal & Prom

Worcester, MA

In June 2020, Lorna Ellis of 4U Bridal & Prom in Worcester applied for a PPP loan with help from MEPPPAI and banking partner BayCoast Bank. Later she applied for forgiveness which was approved in February 2021. "It was easy." "It took about 2 weeks for it to be approved. Now I don't owe anything."

What is a Forgivable Loan?

The PPP is different from a traditional loan or debt in that it is a COVID-19 emergency relief program where the loan is designed to be forgiven -- meaning it would not have to be paid back if used for specific, eligible uses. Businesses that can document using at least 60% of the PPP funds during an 8 to 24-week “Covered Period” for payroll and show they did not have a significant reduction in the number of employees, can apply for forgiveness through their PPP lender.

If for some reason your PPP loan is not 100% forgiven -- for example, if you had to use more than 40% of the funds for rent instead of payroll -- the loan can still be partially forgiven based on how much you have spent on payroll. The balance of the loan will be turned into a 1%-interest, 5-year term loan, which is still very favorable.

How do I get my PPP loan forgiven?

You can apply for loan forgiveness through your PPP lender as soon as you have used up the loan funds; or you can apply up to 10-months after your Covered Period has ended. If the application is successful, the SBA will pay your (the borrower's) PPP lender back directly and the loan will be discharged. Currently, the turnaround time from applying for forgiveness to discharge is about 1-2 weeks.

You can find a list of Partner Banks and Links to Forgiveness Applications HERE

What is needed to apply for forgiveness?

Even though the application process for each lender is different, all PPP forgiveness applications for loans less than $150,000 require the borrower fill out the one-page 3508S Form.

Some lenders have automatically invited their borrowers to apply for forgiveness through an email that has a unique, dedicated link. We recommend searching for emails with the words "PPP forgiveness" to make sure you did not miss the invitation. Invitations may be linked to online forms with much of the needed information already filled out (e.g. your SBA #).

The most important information you would need includes:

Accounting of how much has been spent on payroll vs. eligible non-payroll expenses
Documentation showing how the funds have been used, such as bank statements or copies of checks (e.g. for rent paid), should be readily available. Some, but not all, banks require this documentation to be uploaded as part of the forgiveness application for <$150K loans.
Covered Period End Date.
Borrowers can choose between 8 to 24 weeks as the period in which they want to spend down the loan funds. In general, choosing 24-weeks best allows the funds to be used 100% for payroll (which would make the loan meet the 60%-payroll-use threshold for 100% forgiveness).

To determine the Covered Period End Date for your forgiveness application, you need to find the date on which the loan funds were deposited into your account and count forward 8 to 24 weeks, based on what you put in your PPP loan application.
Number of employees at the time of PPP application, and at the time of forgiveness application.
Note: In the original SBA guidance, a payroll reduction of more than 25% will trigger a potential penalty in forgiveness. The 2021 guidance has largely eliminated the penalty for loans <$150K.

How long can I wait to apply for forgiveness?

You have up to 10-months after the end of your PPP Covered Period to apply for forgiveness.

Your first PPP loan does not have to be forgiven before you can apply for a Second Draw loan. In fact, if you are a corporation, you may want to wait for more clarity and guidance regarding the Employee Retention Tax Credit (ERTC) before applying. The ERTC is now compatible with the PPP and can be a valuable tool to reduce your 2020 business taxes. Please consult your tax professional for more information. Also, banks have been slow to start their forgiveness applications due to potentially more process simplifications, rule changes, and priorities on new PPP lending.

Workshops

Workshops and a slide deck relevant to loan forgiveness will be posted soon.

Helpful Documents

SBA website on Forgiveness

Forgiveness Forms

PPP 3508S Loan Forgiveness Application + Instructions A borrower may use this form only if the borrower received a PPP loan of $150,000 or less.
Please go directly to the SBA website for additional forms

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