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Next Steps for PPP Loans


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by Brian McCabe
Chief Operations Officer


The Paycheck Protection Program (PPP), administered by the Small Business Administration (SBA), offered a critical lifeline to small business owners impacted by the economic implications of COVID-19. Small business owners who took out a PPP loan during the open lending period can now apply for loan forgiveness for all or a portion of their loan based on the guidelines released by the SBA.

Here’s what every small business owner needs to know about the potentially confusing PPP loan forgiveness process and related concerns:

1. What is the best way to apply for PPP loan forgiveness?

For many small businesses, the easiest way to apply for PPP loan forgiveness is by using payroll expenses, provided your business meets at least one of the application criteria outlined below. This will allow you to fill out the “EZ” Loan Forgiveness Application and cut down on the documentation you have to provide.

Below are the “EZ” application criteria:

  • Business owners (sole proprietor, self-employed or independent contractor) with no employees; OR
  • Business owners who did not reduce employee compensation by more than 25% and who did not reduce hours (except employees who refused to return to work); OR
  • Business owners who did not reduce employee compensation by more than 25% during the covered period and who were unable to operate their business at the same level as before Feb. 15, 2020, because of mandated guidelines issued related to COVID-19.

If you don’t meet one of the “EZ” application criteria, you can apply for forgiveness using the standard application.

Additionally, the SBA has recently released Loan Forgiveness Application Form 3508S for those loans of $50,000 or less. The 3508S has some very simple documentation requirements, which makes it much easier to complete and file.

For questions about the PPP loan forgiveness application process and more details about the application criteria specific to your situation, contact your lender.

2. What expenses are eligible to be counted when calculating PPP loan forgiveness?

Eligible payroll expenses include gross payroll for employees, medical benefit expenses minus what the employee paid out of pocket, employer portion of retirement contributions such as pension or 401(k) match, and state unemployment taxes.

Non-payroll expenses eligible under the PPP include utilities, rent or lease payments, business mortgage interest with accompanying amortization table, and transportation-related expenses.

For both payroll and non-payroll expenses, business owners can use paid or incurred costs during the applicable 8-week or 24-week loan period for the calculation. Please contact your banker for questions or clarification about eligible payroll and non-payroll expenses and how they factor into the loan forgiveness equation.

3. What is the timeline for PPP loan forgiveness?

The SBA opened the PPP forgiveness portal to lenders on Aug. 10, 2020. Small business owners have approximately 16 months from the date the loan was originated – or 10 months from the end of the covered period – before they have to start payments on their PPP loans, and they can apply for forgiveness at any time during that time period. 

You can contact your banker for more information on which application to complete and to get the process started. Completed applications should be submitted to the lending institution. More information about the documents you need to include with your loan forgiveness application is available here.

Once the application is completed and submitted, the lending institution has 60 days to process the documents and submit them to the SBA. The SBA has 90 days to review and respond, although it is possible this could take longer.

4. Do you have to pay taxes on your PPP loan?

The early guidance suggests any loan forgiveness received by a business will reduce the amount of deductible expenses that were targeted by use of the loan proceeds, such as payroll, rent, etc.

For more detailed information on how a PPP loan can affect your business’ taxes for the year, please contact your tax advisor.

5. What should you consider if buying a business with an outstanding PPP loan?

The PPP loan, just like any other business loan, is an indebtedness of the company. Before buying a business with an outstanding PPP loan, it is important to find out if the loan can be forgiven based on the forgiveness criteria. Similarly, selling a business while a PPP loan is outstanding and before forgiveness has been determined, can be difficult. The SBA may require an escrow account to be set up to cover the SBA loan should it not be fully forgiven.

If considering purchasing a business with a PPP loan, conduct your due diligence to find out if the business laid off employees or reduced expenses, which can affect the forgiveness piece.

6. What can business owners do to make the loan forgiveness process easier?

The PPP loan forgiveness process will be easier for both the business and the lending institution with the proper documents in place. The “EZ” Loan Forgiveness Application or Form 3508S is the simplest way to apply for loan forgiveness. However, all required documentation and calculations need to be provided with either application form.

For more information on the PPP loan forgiveness process, click here.



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