PPP loan forgiveness – forms, deadlines and overall process
In order to receive PPP loan forgiveness, the borrower must complete and submit the PPP Loan Forgiveness Application to the Lender used by the borrower to initially apply for the PPP Loan. The forms available for the PPP Loan Forgiveness Application are – SBA Form 3508; SBA Form 3508EZ. SBA Form 3508S; or equivalent application provided by the Lender. You can access the SBA PPP loan forgiveness forms by clicking here.
There are important dates to consider when you apply for PPP loan forgiveness.
Borrowers can apply for PPP loan forgiveness using the SBA forms discussed above at any time before the maturity date of the loan which is 2 years or 5 years from the date of loan origination. However, if the borrower submits the forgiveness application within 10 months of the completion of the covered period (covered period is either the 24-week, 168-day period, beginning on the day of PPP loan disbursement or if the borrower received its PPP loan before June 5, 2020, the borrower may elect to use an 8-week, a 56-day period), then you, the borrower, do not need to make any payments until the forgiveness amount is sent to the Lender by the SBA. If a borrower does not apply for loan forgiveness within 10 months after the last day of the borrower’s loan forgiveness covered period, loan payments are no longer deferred, and you must begin making payments on the loan.
For example, let us say you are a borrower whose covered period ends on October 30, 2020 then you have until August 30, 2021 to apply for forgiveness before loan repayment begins. If you do not apply for PPP loan forgiveness before August 30, 2021, then you need to begin making payments on the loan immediately.
If the loan is fully forgiven, the borrower is not responsible for any payments.
If only a portion of the loan is forgiven, or if the forgiveness application is denied, any remaining balance due on the loan must be repaid by the borrower on or before the maturity date of the loan, which is 2 years or 5 years from the date of loan origination.
Interest accumulates during the time between the payment of the loan and SBA transfer of the forgiveness amount. The borrower is responsible for paying the accrued interest on any amount of the loan that is not forgiven. The lender is responsible for notifying the borrower of transfer by SBA of the loan forgiveness amount.
You can use SBA Forms 3508, 3508S, 3508EZ or lender equivalent to submit a PPP loan forgiveness application.
You, the borrower, can use the SBA Form 3508S to apply for your PPP loan forgiveness only if the total PPP loan amount you received from the lender was $50,000 or less. However, the borrower cannot use the SBA Form 3508S if the borrower and its affiliates received $2 million or more in PPP loans from Lenders. This form requires fewer calculations and less documentation for eligible borrowers and borrowers are exempt from reductions in loan forgiveness amounts based on reductions in full-time equivalent (FTE) employees or in salaries or wages. In addition, SBA Form 3508S does not require borrowers to show the calculations used to determine their loan forgiveness amount.
Borrowers who are not eligible to use Form SBA 3508S to apply for PPP loan forgiveness must the other SBA forms to apply – SBA Form 3508 or Form 3508EZ or an equivalent form provided by the Lender.
Borrowers who are sole proprietors, independent contractors or self-employed individuals and had no employees at the time of the application for the PPP loan and did not include in the PPP application any employee salaries in the computation of the average monthly payroll automatically qualify to use SBA Form 3508EZ or a Lender equivalent form.
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