There is a reason to rejoice in these tough times. Relaxations to the Paycheck Protection Program (PPP) forgiveness scheme, for those whose loan amount is $50,000 or less, was announced a few weeks ago.
If you are a small borrower, the Small Business Administration (SBA) now allows you to avail the following perks:
- No reduction in the total amount eligible for forgiveness, even if your business has reduced salaries or headcount (FTE)
- No need to submit the calculations that show how you arrived at the forgiveness amount.
- Simpler supporting document rules
Applying for forgiveness has also been made so much simpler, for small business owners, with the new 3508S application form. This is a rather short and straightforward one-page form. Read on to see how you can fill out this form online:
How to fill in the 3508S application for PPP forgiveness
Once you have downloaded the 3508S application, fill in the essential details such as your business name, contact information, PPP loan number and amount, count of employees and tax identification number. If you have applied for the EIDL loan, be sure to include its details too.
Also, correctly calculate the forgiveness amount and enter it in the relevant field.
Representations and certifications
Next, you need to add your initiative to a few representations and certifications. Here is what some of it broadly encompasses::
- You have only requested for as much forgiveness as the principal amount of the PPP loan
- The PPP loan was not used for unauthorized purposes
- The forgiveness has been accurately calculated
- You have submitted accurate information and documentation
Since the SBA audits all forgiveness requests, you are advised to answer truthfully and retain PPP records for six years -- in case they ever need to cross-check you claims.
Finally, here is the section that helps confirm that you endorse the contents of this form. Especially at a time when everyone is functioning remotely, you may use an eSignature solution such as Signeasy to speed up the filling of this form.
Don't forget the attachments!
While you do not need to show the math behind how you arrived at the forgiveness amount, you will need to collect and submit the documentation of your spending.
Remember, to qualify for forgiveness, at least 60% of the PPP loan should have been spent on the likes of salary, health insurance, state and local taxes and retirement benefits. The rest can be used on other expenses such as rent, mortgage and utilities payments.
- Payroll costs - Payroll is the easiest way to claim forgiveness. You can spend all your loan proceeds on payroll costs alone and have it forgiven, especially since Small and Medium Businesses (SMBs) now have 24 weeks to spend it. Here are things to keep in mind when collecting evidence of payment:
- Ensure that you submit payroll reports from payroll service to show enough forgivable costs.
- Bank statements or cancelled cheques that show payment of salary to employees or from business to oneself (for self-employed) can work as proof.
- Maximum forgiveness that you can hpe to get from a business owner’s payroll is $20,833
- If your business has also secured an Economic Injury Disaster Loan (EIDL) Advance, the PPP forgiveness amount you are eligible for will be less by this amount
- When adding up the forgiveness amount remember to only count the “gross pay”, which is what is on paycheck plus FICA taxes and state and federal income tax.
- Forgivable non-payroll costs: Showcase receipts or cancelled checks for the likes of company mortgage interest, rent, and utilities. Additionally, include evidence like a contract or agreement (and loan amortization schedule for mortgages) that shows the costs were being borne by the small business even before February 15, 2020.
- Unforgivable non payroll costs: It's very rare that you will have to claim these costs. But if you had to, just add documentation that verifies the existence of the obligations/services before February 15, 2020. Also include proof of eligible payments from the covered period.
How long does it take to process the forgiveness?
Find out what your bank is requiring and if they are accepting applications yet.
Once you have all these documents ready, just submit it to the bank or lender that you had secured the PPP loan from. They have 60 days to evaluate your appeal and if approved, they will submit your application to the SBA. The SBA, in turn, takes up to 90 days to review the application and once approved will pay off the loan (on your behalf) directly to the lender or bank. So net-net, you have to wait 150 days for the loan to be paid off.
Raring to submit the form?
I know, it's tempting to submit the document and be done with this loan, but you may want to wait it out a bit more. Drastic changes (eg: extension of PPP fund “spending window” to 24 weeks) in the PPP forgiveness rules seem to be happening quite often now.
Note: There is also another legislation that is pending approval, where SMBs with loans greater than $50,000 but less than $150,000 get to fill in a similar simple form.
But, that said -- be sure to collect all the supporting documents and fill in the 3508S application form. Even sign the form with eSignature solution Signeasy. Keep it ready so that you can easily submit it when you know you are getting the best forgiveness value.
Want to check out Signeasy’s eSignature app? Just subscribe to its complimentary trial today.