PPP Loan Forgiveness FAQs Due to necessity, the Paycheck Protection Program was rolled out at a rapid pace. After a call from President Trump for expanded SBA funding, the program was quickly developed under The CARES Act. As a result, everyone—from Congress and the SBA to lenders and small business owners—has had to adapt and learn about PPP as the program continued to take shape. If you’ve got questions, we don’t blame you. The architects of the PPP have had to essentially build the plane as they flew it. Now that we finally have a clearer sense of what PPP loan forgiveness and the loan forgiveness process look like, we’re addressing some frequently asked questions. What application do I need to use? On May 15, 2020, the SBA released the official PPP loan forgiveness application. The 5-page application will need to be submitted in its entirety to your lender for the SBA to consider your loan forgiveness application. You may be able to complete the application through your lender or through an accounting service if you’re outsourcing your business’s forgiveness preparation. In those instances, the interface for submitting the application may look different, but the application should cover the same materials. On June 20, 2020, the SBA released an additional EZ Application (SBA Form 3508EZ), which is anticipated to help numerous borrowers get through the loan forgiveness process more quickly. This 2-page application can also be submitted to your lender for loan forgiveness if you meet one of the following requirements: You are self-employed and do not have any employees; or, You did not reduce your employees’ hours or did not reduce their salaries or wages by more than 25%; or, You experienced reductions in business as a result of health directives related to the coronavirus (COVID-19) and did not reduce the salaries or wages of your employees more than 25%. What qualifies for forgiveness? According to SBA guidance released on May 20, 2020, the following expenses will be eligible for potential loan forgiveness: Payroll costs incurred during the covered period or the alternative covered period Eligible mortgage interest payments (payments toward the mortgage principle are ineligible) Rent payments during the covered period or the alternative covered period (for lease agreements established prior to February 15, 2020) Utility payments for service provided during the covered period or alternative covered period (as long service began prior to February 15, 2020) What do ‘covered period’ and ‘alternative payroll covered period’ mean? The covered period refers to the 24-week period following the disbursement of the PPP loan or December 31, 2020 (whichever comes first). Originally the covered period was limited to the 8 weeks following disbursement of the loan. This term was extended under the Paycheck Protection Program Flexibility Act (PPPFA). For loans funded prior to June 5, 2020, borrowers may opt to use either an 8-week period or a 24-week period. The covered period begins on the date the borrower received the loan. The SBA also implemented an “alternative payroll covered period” for those borrowers who elect an 8-week period. Borrowers with a biweekly (or more frequent) payroll schedule may elect to calculate eligible payroll costs using the 8-week (56-day) period that begins on the first day of their first pay period following their PPP Loan Disbursement Date (the “Alternative Payroll Covered Period”). How does loan forgiveness differ for sole proprietors and the self-employed? For sole proprietors and self-employed individuals, borrowers will use “Owner Compensation Replacement.” The amount of Owner Compensation Replacement a borrower is eligible for is determined by your 2019 Schedule C. Borrowers using a 24-week covered period may multiply net income on the 2019 Schedule C by 0.208 (which is 2.5/12). This amount is capped at $20,833. This will likely match the full amount of a sole proprietor or self-employed person’s PPP loan. For borrowers using an 8-week covered period, 8 weeks’ worth of pay can be forgiven. The remaining funds will need to be used on other approved funds, including rent, utilities, and mortgage interest in order to be eligible for forgiveness. Who do I work with to have my loan forgiven? Borrowers will have to apply for PPP loan forgiveness through their lenders. The lender will then submit the application to the SBA on behalf of the borrower. A borrower may not submit directly to the SBA for forgiveness. Borrowers may use third-party accounting services to help prepare all the necessary documents and track expenses in order to help submit a complete, clean loan forgiveness application to the lender. You can also leverage Sunrise to help track your expenses as well as prepare your application for you because PPP Loan Forgiveness is a free add-on to our bookkeeping services. What can I do if I’m not approved for loan forgiveness? If you’re not approved for forgiveness, your lender may ask for additional documentation or you may be required to repay the loan. If additional documentation is requested, you may want to work with a professional bookkeeper to ensure qualified expenses have been appropriately documented and the application has been completed correctly. If you are required to repay the loan, the outstanding balance will continue to accrue interest at 1% over a 2-year or a 5-year loan term. Can I repay the loan early? Yes. If you decide to repay the loan early, you can do so without incurring any early payment penalties or fees.