As you know, the Paycheck Protection Program (PPP) offered forgivable, low-interest loans to small businesses facing uncertainty due to the coronavirus (COVID-19), to help businesses retain workers, maintain payroll and cover other existing overhead costs.
Applications for new PPP loans closed in May 2021. If you obtained a PPP loan, here are some helpful tips for applying for Loan Forgiveness. Please check with your finance/accounting group if you are unsure, as ADP® does not maintain records of clients receiving PPP loans.
What is the deadline to apply for Loan Forgiveness?
There is no fixed deadline for borrowers to apply for forgiveness. However, here are some key timelines to know:
· Borrowers have 10 months from the end of their applicable Covered Period* to apply for forgiveness or they will need to begin repaying their loan with an interest rate of 1%.
*Covered Period: The 8-to-24-week period immediately following disbursement of the loan.
Note: There was an Alternative Payroll Covered Period available to certain borrowers who applied for forgiveness in 2020. The Alternative Payroll Covered Period has been eliminated and is no longer available for use in new forgiveness applications.
· Loans issued on or after June 5, 2020, have a maturity date of five years. Loans approved before June 5, 2020, have a maturity date of two years, unless the borrower and lender agree to extend it. Interest accrues from the origination date.
· Borrowers can defer repayment of principal and interest until the time when the Small Business Administration compensates their lender for forgiven amounts of the loan, as long as borrowers apply for forgiveness within 10 months of the end of their Covered Period. Check with your lender for further information about submitting your forgiveness application.
Maximum forgiveness
Loans under the PPP are up to 100% forgivable provided that certain conditions are met, including:
· Loan proceeds must be spent, or qualifying costs incurred, within the applicable covered period (8-to-24 weeks) following receipt of loan proceeds;
· At least 60% must be spent on payroll costs (and no more than 40% be spent on certain specified non-payroll costs); and,
· Forgiveness may also be impacted by reductions in employee hours or employee wages.
Which Loan Forgiveness Application Form should I use?
· PPP loan $50,000 or less:
Use Forgiveness Application Form 3508S, which eliminates potential penalties from wage or employment level reductions. Instead, borrowers need only substantiate that they spent the loan proceeds on covered payroll and nonpayroll costs.
· PPP loan over $50,000, up to $150,000:
For borrowers with loans over $50,000 up to $150,000 (or together with affiliates received loans of $2M or more), you may still use Forgiveness Application Form 3508S, but you must either attest that you did not reduce wage or employment levels (or that any employment level reductions were due to voluntary resignations or compliance with certain government closure orders) or manually adjust your requested forgiveness amount to account for such reductions.
· PPP loan over $150,000:
Consider whether Forgiveness Application Form 3508EZ (EZ Form) is right for you. This version contains simplified calculations and reduced reporting requirements for eligible borrowers.
To determine whether or not you are eligible to use the EZ Form, you can review the instructions on the form itself.
If you cannot use the EZ form or the 3508S form, you’ll need to use the longer SBA Loan Forgiveness Application form, unless your lender has its own form.
Download the PPP Loan Forgiveness Reports from My TotalSource®
ADP has a number of PPP Loan Forgiveness Reports to help you complete your Loan Forgiveness Application, regardless of which form you’re using.
· If your loan was $50,000 or less and you’re using the new 3508S form, you’ll only need to download the PPP Loan Forgiveness Payroll Costs reports.
· If you’re using any other form, you’ll want to download the full suite of PPP Loan Forgiveness reports to help you complete the forgiveness process.
What other documentation will I need?
In addition to the PPP Loan Forgiveness Reports, your lender may require other documentation to substantiate your Loan Forgiveness Application.
For example, if you experienced employment level reductions, but were unable to rehire individuals due to their refusal of reemployment or due to the need to comply with COVID-related government guidelines, you may need to provide documentation of those circumstances to avoid a reduction in your forgiveness amount.
Questions?
For more details on the PPP Loan Forgiveness, including FAQs, visit our website.