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Step-by-step through the PPP forgiveness process

Kim Ellingson
05.18.21
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You’ve already applied for, and received, a Paycheck Protection Program (PPP) loan. So now you’re probably thinking about the next step: applying for loan forgiveness. This may sound like a daunting task, but with a little bit of preparation and organization, the process is relatively straightforward.

To help make the process easier, we’ve got a walkthrough of the process, documents you should have ready, and which form you need to fill out.

Decide when to apply

The first step in applying for forgiveness is to use all of your PPP funds. You will want to use the loan proceeds on eligible expenses and document each one.
As a borrower, you can apply for forgiveness any time up to the maturity date of your loan. However, most borrowers will choose to apply much sooner than that in order to avoid making loan payments.

Most borrowers choose to apply for forgiveness within the PPP’s deferral period, which is within 10 months after the last day of their covered period. If they don’t apply for forgiveness in this period, the program’s payment deferral expires. This means that loan payments will start being due to their lender.

Select the right application form

The Small Business Administration created several different PPP forgiveness application forms – of differing length and complexity – since the program launched. Depending on your business and loan, you may have the option to use one of the simpler versions when applying for forgiveness through your lender.

  • Streamlined form (Form 3508S): The simplest application form and process available is the Form 3508S, which the SBA calls the “streamlined” form. To qualify for this form, you simply need to have an original PPP loan amount of $150,000 or less.
  • Short form (Form 3508EZ): If you didn’t qualify to use the streamlined form, you may still be able to use the SBA’s “short form,” Form 3508EZ. This form is available for use in these cases:
    • Business Type: If you originally applied for the PPP loan as self-employed, an independent contractor or a sole proprietor with no employees.
    • Employee Hours: If you did not reduce salary or wages for any employee by more than 25% and did not reduce the number or hours of their employees (excepting laid-off employees who refused an offer to return).
    • Business Impact: If you did not not reduce salary or wages for any employee by more than 25% during the covered period and experienced reductions in business activity as a result of health directives related to COVID-19.
  • Long Form (Form 3508): If you didn’t qualify to use either of the previously-listed forms, you will need to complete the SBA’s “long form,” Form 3508. You will also need to complete a Schedule A worksheet to accompany your application.

Collect documents and records

Once you know which form to fill out, it’s time to collect the documents that will help you pull it all together.

Compile basic info

We recommend starting by compiling some simple information up-front.

  • The Tax Identification Number used on the signed PPP loan application
  • The email address used when signing original loan documents
  • Social Security Number of original PPP loan signer
  • Annual sales figure from your most recent fiscal year-end

Collect payroll records

The SBA weighs PPP loan forgiveness decisions heavily on payroll expenses. We recommend our borrowers collect and organize their payroll documentation as they begin thinking about loan forgiveness. In particular, you will want to collect:

  • Payroll tax filings reported to the IRS
  • Payroll summary reports reflecting FTE headcount numbers and individual salary wages for the cover period beginning with the funding of your PPP loan
  • State income and unemployment insurance filings

Organize other expense records

You should also collect and organize every transaction you used PPP funds for, including expense records for utilities, rent payments and mortgage interest. We recommend including payment receipts, invoice or billing statements and bank statements to show these expenses.

Complete your application

Now that you’ve prepared your documents, you’re ready to complete your forgiveness application.

Be sure to check with your lender so you understand how the application will be submitted. Many lenders, including Bremer, will have an online application tool in which you will enter the values from your form. Some lenders will accept the full document.

After submitting your forgiveness application with your lender, you may have some additional conversations with them to ensure your full forgiveness application is complete before materials are submitted to the SBA.

Once the full package has been submitted to the SBA, the SBA conducts a forgiveness review and you will hear from your lender with their decision.

After the SBA has completed its forgiveness review, please be sure to retain all records gathered in the PPP loan application and forgiveness application processes, including:

  • Copies of all information provided to your lender in connection with your PPP loan(s)
  • Copies of all information provided to your lender in connection with your forgiveness application(s)
  • Any supporting information that was not required to be submitted, such as payroll records, job offers and refusals, etc.

In most cases, the SBA requires at least a six-year retention period.

Keep in contact with your banker

Reach out to your PPP lender with any questions as you work on your forgiveness application. Now is also a good time to engage your banker and other trusted partners in longer-term business planning discussions around everything from debt restructuring to continuity planning. Having these discussions now can leave you better prepared to navigate challenges that may arise in the future. 

Kim Ellingson

About Kim Ellingson

Kim is a Region President with Bremer, with an over 20-year history of providing business banking solutions.   Kim holds a degree in Business Administration, Management and Operations from Concordia College. She is an active volunteer in the Brainerd Lakes area and northern Minnesota, serving on Board of Trustees for Initiative Foundation. She is also past-Chair of the Brainerd Lakes Chamber of Commerce, a past Board of Directors member for St. Joseph's Foundation, and an active volunteer with her church. )

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