PPP loan forgiveness

The Paycheck Protection Program (PPP) was created by the CARES Act in order to provide forgivable loans to eligible small businesses in an effort to keep American workers on payroll during the COVID-19 pandemic. 

The PPP small business loans were meant to cover 24 weeks worth of expenses beginning on the PPP loan disbursement date. However, if the borrower received the PPP loan before June 5, 2020, he or she may elect to use an 8-week covered period. 

Under the PPP, borrowers may be eligible for loan forgiveness depending upon how the funds were used. In order to be eligible for loan forgiveness, the borrower must have used the funds for payroll costs and other specified expenses such as payments on business mortgage interest payments, rent, or utilities during either the 8 – or 24-week period after disbursement. 

A borrower can apply for forgiveness once all of the loan proceeds that the borrower is asking to have forgiven have been used. Applications for forgiveness can be made any time up to the maturity date of the loan. 

If the borrower does not apply for loan forgiveness within 10 months after the last day of the covered period, the PPP loan payments are no longer deferred, and the borrower will need to start making loan payments to their PPP lender.

If you want to apply for loan forgiveness for your small business, a loan forgiveness application must be completed and submitted to the Lender that is servicing the loan. Your Lender can provide you with the correct form:

  • SBA Form 3508
  • SBA Form 3508EZ
  • SBA Form 3508S
  • Lender equivalent form

Working with a CPA

The process of applying for loan forgiveness starts by contacting the Lender that is servicing your loan and getting the correct loan application form. The second step in the process is compiling all of the necessary documentation.

There are many document requirements related to the forgiveness program for a small business PPP loan. You must provide documentation for:

  • All payroll periods that overlapped with Covered Period or the Alternative Payroll Covered Periods  AND,
  • Non-payroll expenses that were incurred or paid during the Covered Period (this documentation needs to show that these obligations or services existed prior to February 15, 2020.)

Once the loan forgiveness application is completed and you’ve collected all of the required supporting documentation, submit all of the required paperwork to your PPP Lender. You are not required to make payments until the forgiveness amount is remitted to your lender by the Small Business Administration (SBA). 

The process of applying for PPP loan forgiveness can be confusing which is why you should consider engaging the services of a business CPA to help make the process easier and less time-consuming for you.

Need more guidance?

If you are applying for PPP loan forgiveness and find yourself in need of financial consulting services in Southern California, the CPA firm of GYL can provide a full range of accounting, auditing, business advisory, and tax services for your small business.

Our accountants can assist you in getting your PPP loan forgiven so that you can turn your focus to keeping your business up and running during this difficult time.