How to Get Your PPP Loan Forgiven
The United States Treasury is reporting that there were more than five million PPP loans made by over five thousand lenders totaling….$525 million dollars. That is a whole lot of money for small business owners. One of the questions is whether or not it will be enough to help them survive the economic downturn that we have been through, and are still partially in, due to the coronavirus pandemic.
One of the great things about the Paycheck Protection Program (PPP) loans was that there was a provision in the passing of the CARES Act that made it possible to have your PPP loan forgiven. Up to 100% of the funds could be forgiven if you followed certain rules. I talked a bit about those rules back when the program was first announcement. The final ruling has changed some. So, be sure to check that out as well.
Applications for new PPP loans stopped about a week ago through one of the lending networks that I was able to use to help my contacts get their loan through. Now the focus shifts to applying for your loan proceeds to be forgiven.
How to apply for PPP forgiveness
When you are ready to apply you need to keep in mind that you don’t apply for forgiveness of your loan through the Small Business Administration (SBA) itself. You take your request to the lender that processed your application and funded your loan. Note that I said the lender. That means if you applied for the loan through a network, like my contacts did, that you still need to work with the lender that ended up funding the loan.
You will need a particular form in order to apply. That form is the 3508 or 3508EZ. The thing I love about the form is that it is roughly three pages long. The first page captures your loan details and the amount of loan forgiveness, per category, that you are seeking. The categories are payroll, mortgage interest, rent or lease payments, and utilities. The second page is where you must attest to the information you are including and the third page includes more detailed instructions for answering the demographic questions.
What other documents will you need to provide?
What I don’t love about the 3508EZ form is that it is almost too simply and it leaves out critical information. Like what other types of documents you will have to provide. For that I was able to find a resource from the Department of Treasury that goes into even more detail.
Count on having to produce whatever kind of documentation you can to justify the amounts you are asking to be forgiven. That is why it is critical that you have kept solid accounting records of where you spent the money. For example, you should count on providing bank statements, payroll statements (from third-party payroll providers), utility statements, payment receipts, cancelled checks, and more.
What about owner’s distributions and other questions?
The SBA has also put out an FAQ that answers some of the more frequently asked questions. For example, the answer whether or not owner’s compensation from PPP funds can be forgiven. This is broken down by the type of legal entity you report your taxes under.
Up next
As always, I suggest you talk with your accountant in order to take full advantage of the forgiveness provision.
In Thursday’s article I will be talking about the potential for a second round of PPP loans that the U.S. government could be making available.
