Steps to Prepare for PPP Loan Forgiveness

What is Paycheck Protection Program (PPP) forgiveness? Simply put, forgiveness is an application process in which a business that received a PPP loan will request the SBA to forgive their loan so the business does not have to pay the loan back.

PPP provides critical funding to many businesses who are impacted by the COVID-19 pandemic. A key component of the program is loan forgiveness for qualifying expenses. If a borrower receives a PPP loan, they must also apply for forgiveness of the loan or they will have to pay the loan back with money out of their own pocket. If the loan recipient applies for forgiveness and full forgiveness is granted, the borrower does not have to pay the loan back.

Borrowers are eligible for forgiveness in an amount equal to the sum of their eligible expenses during their chosen 8-week to 24-week Covered Period. To be considered for full forgiveness, borrowers must use at least 60% of their loan proceeds on payroll costs. Employee and compensation levels must also be maintained. Note, to be considered for forgiveness for a PPP loan, businesses must apply for loan forgiveness through their financial institution.

With a new COVID relief package signed into law in 2021, there are many provisions that impact PPP, including the following:

• A simplified PPP forgiveness process allowing PPP loans of $150,000 or less to be forgiven with a streamlined process
• Repeal of a CARES Act provision that required PPP borrowers to deduct the amount of their EIDL advance from their PPP forgiveness amount

Currently, FNBO is taking First Draw and Second Draw forgiveness applications. If your business secured a PPP loan through FNBO and will be applying for forgiveness, there are steps you can take now to get ready for the forgiveness application process.

1. Determine Which Online Forgiveness Application You Should Use
   When you apply for forgiveness online using the FNBO Portal, the process will help you pick the applicable forgiveness application for you to use. If your loan was $150,000 or less, you can use the simplified 3508S application during the online application process. Applicants using the 3508S online application for First Draw forgiveness do not need to upload an image of the paper copy of the 3508S form or any other documentation but will need to keep the documentation related to covered costs for their own records, as they may be requested by the SBA.

   The 3508EZ form and the 3508 form are for borrowers who received a PPP loan over $150,000 or for borrower’s whose loan is $150,000 or less and fits into a special category. To ensure you’re prepared for the online application process and help you identify any additional information you need to gather prior to applying, we recommend filling out a paper copy of the 3508EZ or 3508 form (whichever is applicable) prior to applying for forgiveness online through FNBO. You will not need to upload an image of the paper copy of the 3508EZ or 3508 but will need to upload other supporting documentation for payroll and non-payroll covered costs as appropriate.

2. Review Your Eligible Costs
   The Paycheck Protection Program allows borrowers to be forgiven for certain expenses. This may include payroll incurred or paid during the Covered Period (salary, wages, vacation, parental, family, medical or sick leave, and health benefits), mortgage interest, rent and utilities.
   
   We suggest you familiarize yourself with all of the criteria here before applying. You also need to ensure you’ve spent all of your loan funds on eligible costs prior to applying for forgiveness and have documentation to support the use of proceeds during the Covered Period.
   
   
3. Get Your Documents in Order
   To get ready to apply for forgiveness and ensure a smooth application process, we recommend that you get your documents ready in advance. You may need to provide documents for eligible payroll costs verifying the number of full-time employees on payroll and their pay rates to ensure you meet the staffing and pay requirements for forgiveness. This may include documenting all employee compensation, cash tips, payment for leave and employee benefits. For non-payroll expenses, you may need to provide documentation which shows interest payments on mortgages, rent payments on leases and utility payments. It is recommended that you have all of your documents saved in PDF format. This will make the upload process easier and will save you from having to re-format your documents later. Additionally, all loans $2 million and over will be subject to SBA loan reviews and additional documentation may be required.
   
   
4. Request Forgiveness
   Now that you’ve reviewed your costs, prepped your documents, and filled out the appropriate application, you’re ready to apply for forgiveness. Once you submit an application and all of the required documentation, FNBO has 60 days to review your application and documentation and submit its forgiveness decision to the SBA. The SBA then has 90 days to review and make a determination on loan forgiveness. Note, you can’t apply for forgiveness with any bank—you need to apply for forgiveness through the financial institution that gave you the loan. If you do not apply for forgiveness within 10 months of the end of your chosen Covered Period, deferral on the loan ends and you must begin making payments.

The FNBO customer portal is currently open to First Draw and Second Draw Forgiveness applications. Learn more here.

PPP Loan Forgiveness Resources

3508 Loan Forgiveness Application and Instructions

EZ Loan Forgiveness Application and Instructions

3508S Loan Forgiveness Application and Instructions

Loan Forgiveness Information