What does the PPP loan forgiveness process look like?

In this 4-minute read:

  • What do you need to do to get your PPP loan forgiven?
  • When can you start your PPP loan forgiveness application?
  • How can you apply for PPP loan forgiveness?
  • What happens after you turn in your PPP forgiveness application?
  • Additional resources once you’ve finished your application

A huge draw of the Paycheck Protection Program loans is that they can be completely forgiven, meaning your business doesn’t have to pay it back. So long as you meet certain guidelines for spending your funds, this loan can essentially turn into income that you can use to help your business. 

But how do you go about getting your loan forgiven and what does that process look like?

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What do you need to do to get your PPP loan forgiven?

You were likely aware of the requirements and spending guidelines of the PPP loan when you applied for it, but we’ll go into the basic details again here. When you received your PPP funds, you must spend them on specific authorized costs in order to receive full loan forgiveness. 

Those requirements are:

  • You must maintain your employee counts and their compensation levels 
  • Your loan proceeds must be spent on authorized payroll costs and other eligible business expenses
  • You must spent at least 60% of your loan proceeds on payroll costs
  • IMPORTANT NOTE: For 2021 there are certain exceptions to the “maintaining employees levels and compensation” rule. If you received a PPP loan that was $50,000 or less, you are exempt from having to maintain your employee and compensation levels in order to receive loan forgiveness. Your loan must still be spent on approved costs and you will still need to document that you spent at least 60% of your funds on payroll expenses. 

If you don’t meet all of these requirements, you do have the chance at getting partial loan forgiveness, and that will be determined during the application process. 

When can you start your PPP loan forgiveness application?

According to the SBA, you can apply for PPP loan forgiveness once all of your loan proceeds have been used. This generally falls at the end of your 8 to 24-week covered loan period. At the end of your covered period, you’ll have 10 months to complete and submit your loan forgiveness application with your lender. After that 10 months, interest is no longer deferred, and you’ll have to start paying back your loan if it hasn’t been forgiven, so turn in your application as soon as you can. 

How can you apply for PPP loan forgiveness?

To apply for PPP loan forgiveness, you’ll need to fill out a specific application with your PPP lender. PLEASE NOTE: Different SBA lenders may have different processes and even forms for PPP forgiveness. Be sure to consult with your lender and follow their instructions.

There are three different PPP forgiveness application forms right now:

  1. 3508
  2. 3508EZ
  3. 3508S

The loan amount you received along with some other requirements will determine which application you need to fill out. 

If you received $150,000 or less, then you’ll use Form 3508S. Read our walkthrough on completing form 3508S.

If you received more than $150,000, then you’ll use Form 3508 or 3508EZ, depending on those requirements that you need to meet. If you meet one the following requirements, then you’ll fill out 3508EZ:

  • You are self-employed and don’t have employees
  • You have employees but maintained your employee count, did not reduce employee hours, and did not reduce employee wages by more than 25%
  • You have employees and did not reduce their wages by more than 25% and could not operate normal hours as a result of decreased business operations from adhering to COVID-19 public health guidelines

If you don’t meet those requirements, you’ll fill out Form 3508. Read our walkthrough instructions for completing form 3508 and 3058EZ.

Your lender will make sure you get the appropriate forgiveness application form. They might even send you an email at the end of your covered period with the applicable form for your business. Again, your lender may have internal processes or even online PPP forgiveness application forms. Be sure to follow their instructions.

Once you’ve filled out your form, you’ll turn it back in via your lender along with any documentation necessary to verify how you spent your PPP funds. This might include bank statements, invoices, cancelled checks, lease agreements, utility statements, etc. If you aren’t sure what to include with your application, talk to your lender. 

What happens after you turn in your PPP forgiveness application?

When you turn your application into your lender, they will process it with the SBA. The SBA then has up to 90 days to make a final decision on your loan forgiveness. Once a decision has been made, your lender is responsible for notifying you of that decision. 

If your loan is forgiven, then the process ends and you don’t have to worry about paying anything back. 

If you only had partial loan forgiveness or you end up having to pay the full loan back, your lender will provide you with the repayment terms, including the date when your first payment is due. 

You do have the right to appeal certain SBA loan decisions if you don’t get the response you were expecting. Just know that doesn’t guarantee that the decision will change. 

Additional resources once you’ve finished your application

While the PPP loan process is technically over once you’ve been notified that your PPP loan has been forgiven, there is additional information that can be helpful to know after all is said and done. And if your loan wasn’t fully forgiven, you’ll want to know what happens next. 

Check out these resources for additional guidance on the Paycheck Protection Program:

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