The forgiveness of PPP loans is fast approaching. To avoid unnecessary PPP loan payments, borrowers must submit loan forgiveness applications to their lenders within 10 months of the end of their respective covered periods. This means that borrowers receiving PPP loans in the initial tranche in early to mid April 2020 will have maturities starting in July 2021. If a loan forgiveness application is received on time, payments are deferred until a decision on the forgiveness application is made. produced by the lender and the Small Business Administration (SBA).
In December 2020, the SBA began requiring borrowers in excess of $ 2 million to apply for a loan in connection with a loan forgiveness application. Many borrowers found these questionnaires intimidating, cumbersome and intrusive.
Notably, the SBA formally canceled loan forms and verification of PPP loans of $ 2 million or more in a notice sent on July 9, 2021. In this notice, the SBA stated that it will no longer request any version of the need for the loan. questionnaire (Form 3509 SBA for commercial borrowers and Form 3510 SBA for non-commercial borrowers). In addition, it is no longer required to fill out previously requested loan application forms. For PPP loans with an open request for additional documentation related to the loan eligibility questionnaire, the SBA advised lenders to close the request and send the loan back to the SBA.
Therefore, to apply for a loan forgiveness, you must complete and submit to the lender, along with supporting documentation, Form SBA 3508, Form SBA 3508EZ, or Form SBA 3508S (or its equivalent). While the SBA ruled out the questionnaire on the need for a loan, it did not eliminate the need for borrowers to ask for forgiveness for a PPP loan to document the use of the loan proceeds.
For payroll accounting, documentation must be provided for billing periods that coincide with the period covered. This may include bank statements or reports from third-party payroll providers that document the amount of cash compensation paid to employees. This may also include payroll tax that is reported or will be reported to the IRS (usually Form 941) and the state’s quarterly employee payroll reports and unemployment insurance tax returns submitted or sent to the respective states.
Salary cannot be taken into account in calculating eligible salary costs for loan forgiveness insofar as it is qualified salary paid between April 1, 2020 and December 31, 2021, which is taken into account for the purposes of the loan request to retain employees in accordance with section 2301 of the Act. CARE Law.
Documentation of excusable non-wage expenses should also be included. For example, lender repayment schedules and receipts confirming payments or lender account statements can document mortgage interest payments. Likewise, copies of leases and receipts or canceled receipts can prove rental expenses. Such documentation can support utility bills, acceptable operating costs, acceptable supplier costs, and acceptable worker protections.
A loan forgiveness application and supporting documentation must be submitted to the PPP lender, usually through an online portal. It is imperative for borrowers to immediately contact their lender regarding requests for additional documentation and communicate with their lender throughout the loan forgiveness process.
The SBA still has the authority to review the PPP loan and the lender’s forgiveness decision. In this case, the lender will provide the borrower with notice of the SBA review and any subsequent SBA review decision. Borrowers have the right to appeal certain SBA review decisions.
To summarize, the deadlines for forgiving PPP loans are fast approaching, but the process has been simplified recently by eliminating the loan questionnaire that was previously used for PPP loans of $ 2 million or more. Despite the elimination of the eligibility questionnaire, the SBA did not cancel the loan eligibility check.
PPP borrowers are strongly encouraged to submit a Loan Forgiveness Application and supporting documentation within 10 months of the last day of the covered period in order to receive deferred payments on the PPP loan and ultimately the loan forgiveness.