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How to Apply for PPP Loan Forgiveness

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The Paycheck Protection Program (PPP) provided vital financial support for businesses this past year. The intention of the program was to help with payroll and operating costs for the short-term disruption caused by the pandemic. Choice Bank secured PPP loans for over 4,000 local businesses, helping to protect more than 65,000 jobs in our communities.

As the end of the COVID-19 pandemic draws near, businesses can begin applying for PPP loan forgiveness. Loan forgiveness essentially turns your PPP loan into a grant if your business meets certain criteria. Businesses eligible for loan forgiveness had to have spent at least 60% of their PPP loan on payroll expenses. These businesses can apply for loan forgiveness at any point before the maturity date of the loan. However, it is recommended that borrower apply for loan forgiveness before the payment deferment period ends.

PPP loan forgiveness applications are currently being accepted by lenders. Here’s what you need to know about the PPP loan forgiveness application, eligible expenses, and timeline.

 

How do I know what forgiveness application is right for me?

Businesses need to submit a forgiveness application to the financial institution that borrowed them the PPP funds. There are three different PPP loan forgiveness application forms. Each form’s requirements are summarized below. Your PPP lender will be able to provide you with the correct form for your business.

 

Form 3508S
  • Loan amount $150,000 and less
  • No supporting documentation is required
  • Retain supporting payroll documents for 4 years and other records for 3 years after your PPP loan is forgiven

 

Form 3508EZ
  • Loan amount greater than $150,000
  • This application may be used on your PPP loans if at least ONE of the following statements is true:
    • Borrower did not reduce the salaries or wages of their employees by more than 25% and did not reduce the number of employees or hours of their employees.
    • Borrower did not reduce the salaries or wages of their employees by more than 25% and experienced reductions in business activity as a result of health directives related to COVID-19.
  • Retain supporting payroll and non-payroll documents for 6 years after your PPP loan is forgiven

 

Form 3508
  • Loan amount greater than $150,000
  • This application will be used on your PPP loans if at least ONE of the following statements is false:
    • Borrower did not reduce the salaries or wages of their employees by more than 25% and did not reduce the number of employees or hours of their employees.
    • Borrower did not reduce the salaries or wages of their employees by more than 25% and experienced reductions in business activity as a result of health directives related to COVID-19.
  • Retain supporting payroll and non-payroll documents for 6 years after your PPP loan is forgiven

 

There may be other circumstances that dictate what form your business can use, such as affiliate companies. Review the full application for more details.

 

What is the covered period?

The covered period is the time frame you have to spend your loan funds for forgiveness eligibility. Borrowers have the option to select a covered period that ends on a date that is at least 8 weeks, but not more than 24 weeks after the date of loan disbursement. Payroll and non-payroll expenses paid or incurred during the covered period are eligible for forgiveness.

 

What is considered an eligible expense?

You will need to collect payroll and non-payroll expense documentation to support your forgiveness application. Below are the eligible payroll and non-payroll expenses for loan forgiveness. Inquire with your lender as they may have additional application requirements.

 

Payroll Expenses
  • Salary, wage, commissions, or similar compensations
  • Payment of bonuses and hazard pay
  • Payment of cash tips or equivalent
  • Payment for sick, vacation, parental, family, or medical leave
  • Payments for group health care benefits
  • Payments for retirement benefits
  • Payments of state or local taxes (no federal taxes)

 

Non-Payroll Expenses
  • Interest payments on real or business property
  • Business rent and lease payments
  • Utility payments for services such as electricity, gas, water, transportation, telephone, or internet access
  • Operational expenses including payments for software, cloud computing, and other HR and accounting needs
  • Property damage during 2020 due to public disturbances that was not covered by insurance
  • Supplier costs related to a contract or purchase order in effect that are essential to operations
  • Worker protection expenditures for personal protective equipment or adaptive investments to comply with COVID-19

 

When can I expect my application to be approved?

Once you apply for loan forgiveness, allow 60 days for your bank to review and an additional 90 days for approval from the Small Business Administration.

 

When is the deadline to apply for PPP loan forgiveness?

Borrowers can apply for loan forgiveness any time on or before the maturity date of the PPP loan. However, the payments are no longer deferred if the borrower does not apply for loan forgiveness within 10 months after the last day of the maximum 24-week covered period.

 

What if my loan is not completely forgiven?

If your loan is not completely forgiven, the remaining balance, including interest, will be repaid in monthly installments to your loan maturity. Interest begins accruing from the first date of disbursement but is initially deferred to the date that SBA remits the borrower’s loan forgiveness amount to the lender.

 

Do I need to apply for First Draw loan forgiveness before I can apply for Second Draw loan forgiveness?

Yes, if the Second Draw PPP loan is more than $150,000, the borrower must submit the loan forgiveness application for the First Draw PPP loan before the loan forgiveness application for the Second Draw loan.

 


Choice Bank’s Cristen Purdy (Commercial Lender and Golden Valley Location President) and Bridget Hansen (AVP Credit), led an informative webinar about PPP loan forgiveness for Minneapolis Business Mentors. They discussed multiple loan forgiveness topics like what application is best for your business, required supporting documentation, and the approval timeline.

 


For more information on PPP loan forgiveness visit:

Choice Bank Website                SBA Website

 

Questions?

Please feel free to reach out to our Choice Bank PPP help team directly:
Email: pppquestions@bankwithchoice.com
Phone: (763) 398-3060
Mon – Fri, 8:00AM – 5:00PM CST