The ten-month PPP forgiveness deadlines are beginning to pass with many likely to come in August and September. (UBS)

For the millions of business owners who sought relief at the onset of the pandemic with a forgivable PPP loan, an important deadline is looming. For borrowers to avoid having to make any monthly payments with interest on their PPP loan, they must apply for forgiveness within ten months of the end of their loan’s covered period.

With covered periods ranging from eight to 24 weeks from the initial disbursement of their funds, the ten-month deadlines are beginning to pass with many likely to come in August and September. Missing the deadline will initiate monthly payments with interest. After the deadline, borrowers may still seek forgiveness up until their loan matures, which could be either two or five years.

The good news is that, per SBA data, more than half of the balances and loans from 2020 have already been forgiven. Further, the SBA has recently indicated that they plan to implement enhancements to simplify and speed up the forgiveness process, particularly for larger loans which have taken longer to process.* With the closure to new applications in June, the SBA can now divert more resources to forgiveness rather than origination.Additionally, the SBA informed lenders that they would be withdrawing a controversial loan necessity questionnaire for borrowers with loan sizes exceeding $2 million.**

Seeking Forgiveness

Streamlining the forgiveness process and devoting more resources will be greatly appreciated by business owners, but many may not know where to begin. James Jack, the head of UBS Wealth Management USA’s Business Owners Client Segment, recommends business owners “look in your lender’s online web portal where you likely uploaded your original documents to find an application.”

Next, Jack says, review the different forgiveness forms carefully and determine which applies to you:

  • 3508S – a simple one-page form for loans that were $150,000 or less that requires very little math
  • 3508EZ – while not a one-page application, this form exempts larger borrowers from many of the complicated formulas around the number of workers. Users of this form must attest to meeting requirements, such as not reducing wages by more than 25% and having their business impacted by government pandemic shutdowns
  • 3508 – the most complicated form for loans larger than $150,000 and businesses that cannot attest to the requirements laid out in Form 3508EZ

As borrowers fill out their appropriate form, each will indicate the key requirements to maximize forgiveness. The most important items, according to Jack, are that the proceeds are used for allowable expenses, which include payroll, rent and utilities, and that at least 60% of the proceeds were used for payroll. For “Second Draw” loans, an additional requirement is that borrowers must provide evidence that supports a 25% YoY reduction in gross receipts in any quarter in 2020.

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Main contributors: UBS Editorial Team

* SBA is working to streamline PPP loan forgiveness — again. Especially for these types of loans. The Business Journals, 9 June 2021.

** SBA withdraws use of controversial PPP loan forgiveness form. The Business Journals, 12 July 2021.

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