COVID-19 Updates

Paycheck Protection Program Loan Forgiveness Application Released

By  |  

The Small Business Administration (the “SBA”) has released the Paycheck Protection Program (“PPP”) loan forgiveness application (the “Forgiveness Application”).  The Forgiveness Application, SBA Form 3508, is available here.

PPP borrowers must submit Forgiveness Applications and all required documentation to the lenders who disbursed their PPP loans in order to obtain loan forgiveness.  There is currently no deadline for submitting Forgiveness Applications, but a borrower cannot submit its Forgiveness Application until at least eight weeks after its PPP loan was disbursed, because of the need to list and document covered expenses from the eight-week period following the loan disbursement.  In the case of borrowers who received more than one loan disbursement, the eight-week period begins on the date of their first PPP loan disbursement.

The PPP provides borrowers until June 30th to bring their employment levels and employee wages to pre-pandemic levels before their loan forgiveness amounts are reduced to reflect reductions in headcount or wages.  Borrowers with fewer employees now than during the base period or who have reduced the wages of any employee who earned $100,000 or less by more than 25% should wait until after June 30th to complete their Forgiveness Applications.  For most borrowers, the base period is either February 15-June 30, 2019 or January 1-February 29, 2020, but see this post for more information about the base periods for seasonal employers.

When a borrower is prepared to begin its Forgiveness Application, we recommend completing it in the following order:

  • collect documentation listed on page 10 (and be sure to retain copies for 6 years after loan forgiveness or full repayment);
  • complete PPP Schedule A Worksheet or get a report that provides that information from your payroll system or payroll processor;
  • complete PPP Schedule A;
  • complete PPP Loan Forgiveness Calculation Form;
  • optional step: complete PPP Borrower Demographic Information Form; and
  • complete and sign the certification/signature page.

Costs eligible for loan forgiveness are:  payroll costs, mortgage interest payments, rent payments (for real estate and leased business equipment or other personal property), and utility payments (including electricity, gas, water, transportation, telephone, or internet access) of the business for the 8 weeks after the loan was disbursed.  Mortgages, lease agreements, and utility services must predate February 15 for those expenses to be eligible for forgiveness.  Remember that payroll costs include other items besides salaries and wages, but that forgivable cash compensation is capped at $15,385 per employee (which equals 8 weeks of a $100,000 salary). Borrowers may also count commissions and tips; payment for vacation, sick or family leave not covered by other coronavirus tax relief credits; dismissal or separation payments; employer payments of group health care costs, including health insurance premiums; employer payments of retirement benefits; and payments of state and local taxes on employee wages.  The Forgiveness Application includes a calculation to ensure that at least 75% of total forgiven costs are eligible payroll costs.

Although the loan forgiveness period is only eight weeks long, it covers both actual expenditures paid in that timeframe and costs incurred during those eight weeks but paid on or before the next regular payroll date or due date for a mortgage, rent, or utility payment.  Employers who pay biweekly or more often may elect to count their payroll costs from the first pay period after the eight-week period begins to the date eight weeks later, instead of pro-rating between pay periods, but should use the actual eight-week period following immediately after disbursal for other covered expense calculations.

The Forgiveness Application includes instructions for reducing loan forgiveness based on reductions in full-time employee equivalents (“FTEs”) or reductions of more than 25% in any employee’s salary or wages relative to the base period.  It also explains several exceptions to the FTE reduction rules.  If a former employee refused an equivalent offer of rehire, or if an employee was fired for cause, voluntarily resigned, or voluntarily requested and received a reduction in hours, the borrower may still include that employee in its FTE calculation, unless a new employee who filled the post has been counted instead. Employees who earn more than $100,000 per year are excluded from the reduction in loan forgiveness based on wage reductions.

The SBA may instruct lenders to disapprove a Forgiveness Application if it does not include all requested documentation or if the SBA determines that the borrower was not eligible for the PPP loan it received.  The SBA may also request additional information for purposes of determining loan forgiveness, and failing to provide that information could result in a denial of the loan forgiveness request.  The SBA is permitted to review borrower documentation related to PPP loan forgiveness for up to six years after a PPP loan is forgiven or repaid in full, so borrowers should retain copies of all relevant documents, even those that did not need to be submitted with the Forgiveness Application, such as documentation of rejected rehire offers.

Click here to read COVID-19 News and Updates

* * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * *


For more information about the Paycheck Protection Program, please contact your attorney at Gravel & Shea PC or any of the following attorneys at the firm:

Chip Mason (, Cassandra LaRae-Perez (, Oliver Goodenough (, Keith Roberts (, Pauline Law (, or Catherine Burke (