It Is Time Apply for PPP Loan Forgiveness, Here Is How

Many businesses are now reaching the end of their covered period, the 24 weeks “covered” by the PPP loan during which they must use the money if they want the loan forgiven.  

So, now the attention turns to applying for forgiveness.  

In this document, we are attempting to make the convoluted topic of forgiveness easy to understand.  But it is convoluted and there are a number of caveats.  So approach this topic with patience. 

In this post we cover:

How to apply for forgiveness  including an overview of the various PPP loan applications.

We cover when to apply for forgiveness and include some frequently asked questions and a reference to documents you can use to support your application.

By when must I apply for PPP loan forgiveness

You can apply for forgiveness any time before the maturity date on your loan. (The maturity date is the day when the last payment is due). However, you should apply before the payment deferral ends. Payment deferral ends 10 months after the end of your covered period.

If you apply for forgiveness before the end of the deferral period you will not make any payments until the SBA makes a decision on your forgiveness application. (Assuming they forgive your loan this would mean that you will not ever make payments).

How to apply for PPP loan forgiveness

The process is straightforward:  you gather documents, fill out a form, and submit the application to your bank.  Your bank may either have you fill out the SBA applications and submit them or they will create and have you submit an online application.  Either process will require the same information. 

There are three categories of forgiveness applications: one for anyone with a loan under $50,000, the EZ application, and the full application.  

Here is a quick way to think about the different applications.

If your loan:

  • is less than $150,000 use form 3508S. 
  • is more than $150,000 then check the criteria for 3508EZ, ideally you would use this form.
  • doesn’t qualify for 3508EZ use form 3508.  

Overview of the PPP loan forgiveness applications

If your loan is less than $150,000 and you can certify that the loan:

  • Was used to pay costs that are eligible for forgiveness (payroll costs to retain employees; business mortgage interest payments; business rent or lease payments; or business utility payments); 
  • includes payroll costs [this includes payments to yourself] equal to at least 60% of the forgiveness amount; 
  • if a 24-week Covered Period applies, does not exceed 2.5 months’ worth of 2019 compensation for any owner- employee or self-employed individual/general partner, capped at $20,833 per individual; and 
  • if the Borrower has elected an 8-week Covered Period, does not exceed 8 weeks’ worth of 2019 compensation for any owner-employee or self-employed individual/general partner, capped at $15,385 per individual.

Then use form 3508S. 

This form removes a lot of the complexity and need for substantiating your claim.  You will still submit something substantiating your payroll claim.  Since most borrowers with loans under $150,000 are sole proprietors, the documentation required is more flexible.  

Download 3508S here.
Download 3508S Instructions here.

Click here for an overview of documents you can use to support you application.

If your loan is more than $150,000 or you do not meet the criteria for the 3508S form, then check the requirements for 3508EZ:

This is a simplified form that removes a lot of the reporting around FTE’s and salary reduction.  

You can use the 3508EZ form if: 

  • You are self-employed and have no employees. 

Or you have employees but 

  • Did not reduce the salary of anyone earning less than $100,000 by more than 25%. 


  • You did not reduce employees or if you did reduce employees you can certify that COVID negatively impacted your business, either through reduced business or as a result of mandated closures, so you could not operate as normal.  

Use the documents listed below to document your payments, fill in the form, and submit it to the bank.  

Read more about the 3508EZ form in our post here.

Download the 3508EZ form here.
Download 3508EZ instructions here.

Click here for an overview of documents you can use to support you application.

If you can’t use the 3508EZ form or the 3508S form then you will have to use the 3508 form

This form is the full application form.  The challenge here is calculating the FTE reductions and the impact that the FTE reductions will have on forgiveness.  

The instructions are long and involved and if you need to go through this we will have to do it one on one. 

Download form 3508 here.
Download 3508 instructions.

Click here for an overview of documents you can use to support you application.

Frequently Asked Questions

How much of the Paycheck Protection Program (PPP) Loan is forgivable? 

  • 100% of the Paycheck Protection Program Loan is forgivable if the money is spent on payroll, rent, utilities and interest for some loans incurred before February 2020.   
  • 60% of the amount forgiven must have been spent on payroll.
  • For most companies reaching this 60% threshold will be easy because you have 24 weeks to spend the money and the loan amount was 2.5 times the average 2019 payroll.  

What are forgivable expenses under the Paycheck Protection Program (PPP).

Payroll costs which the bill defines as:

  • salary, wages, commissions, or similar compensation up to $100,000 annualized
  • payment of cash tips or an equivalent
  • payment for vacation, parental, family, or sick leave
  • allowances for dismissal or separation.
  • payments for group health care benefits, including insurance premiums
  • payment of retirement benefits
  • payment of state and local taxes assessed on employee compensation

Payroll costs do not include: 

  • Compensation above $100,000.
  • Employer share of federal taxes (FICA and Medicare).
  • Compensation of employees who reside outside of the US. 
  • Qualified sick or family leave wages for which a credit is available under the Families First Coronavirus Response Act. 

Other acceptable uses of the loan are (these can make up 40% of the forgiven amount)

  • Rent
  • Mortgage interest on business-owned property
  • Utilities (Electricity, gas) 

As long as 

  • All of these obligations must have been in place by February 15, 2020. 
  • The government will reduce the forgivable amount of the loan if you reduce employee count and or reduce salary by more than 25%.
  • To be eligible for forgiveness you will have to support all of the expenses that you claim.

What is Paycheck Protection Program rule regarding full time equivalent employees (FTE’s)?

The CARES act initially required that you restore FTE’s before June 30, 2020. The new law changed that date to December 30. The rules around restoring FTE’s remain the same except that: 

“if a borrower is unable to rehire previously employed individuals or similarly qualified employees, the borrower will not have its loan forgiveness amount reduced based on the reduction in full-time equivalent employees.” 

Treasury Department Rules, June 10, 2020

So, if your business was impacted by COVID, the employment requirement should not be an issue.  

What is the covered period and can I choose a different one?

The covered period is the period during which you can use your PPP loan funds.  It starts when you receive your funds and lasts either 8 or 24 weeks.  

Loans issued before June 5 automatically have an 8-week covered period and loans issued after June 5 have a 24-week covered period. 

You should be able to change your covered period to a 24-week period if your loan originated before June 5.  There is some confusion and some of the language suggests you cannot switch to a longer covered period.  But checking with the banks they seem to be allowing this.  

Generally, you will be better off with a 24-week covered period because you have longer to spend the money, so it is easier to spend it on covered expenses.  

Supporting documents for your PPP loan forgiveness application

Payroll Expenses

Eligible Cost Recommended Supporting Documents 
Cash compensationPayroll service provider reports showing the amount of cash compensation paid to employees and the taxes withheld and paid, where relevant.  


Bank account statements and payroll tax forms (e.g. form 941) and state quarterly wage reports and unemployment insurance tax reports that you have reported or will report to the state. 


A self-prepared (accountant prepared) payroll report or schedule that shows payments made during the covered period.  Show company totals and list all employer-paid state and local taxes.   

Eligible cash compensation includes gross salary, gross wages, gross tips, gross commissions, paid leave, and allowances for dismissal or separation.  This may include bonuses and hazard pay as well as salaries to furloughed employees.  

Do not include payments exceeding $46, =154 per individual if using the 24-week covered period, or 15,385 per individual if using the 8-week period.  

Also, do not include payments to contractors that you will report on a 1099 form. 

Special rules for owner-employees, self-employed individuals, and partners: you are eligible for loan forgiveness up to $20,833 (the 2-and-a-half-month equivalent to $100,000 a year.) if you are using a 24 week covered period OR $15,385 for an eight week covered period.   
Employer contributions for employee health insurance and employee retirement plans Document this using account statements, payment receipts, or canceled checks.  

Show the amount of any employer contributions to employee health insurance and retirement plans included. This may be in your payroll report from your payroll provider, in which case you won’t need anything else. 
Average full-time equivalency (FTE) for Form 3508If you are using form 3508 and not form 3508EZ (be sure to check first that you can’t use 3508EZ) you will need to document your FTE’s.  

To do this create an FTE report showing the average number of FTE employees per week during one of these periods:
February 15, 2019, to June 30, 2019; or
January 1, 2020, to February 29, 2020; or

If you are a seasonal employer, you can use one of the periods above or any consecutive 12-week period from May 1, 2019, to September 15, 2019.

Substantiating documents are the same ones as you would use for cash compensation, just showing the different periods.  

Documents may include payroll reports, Bank account statements, and payroll tax forms (e.g. form 941) and state quarterly wage reports and unemployment insurance tax reports that you have reported or will report to the state. 
Average full-time equivalency (FTE) for Form 3508EZ If using Form 3508EZ and you meet the conditions related to the reduction of salaries, the number of employees, and hours, you will need to document the average number of full-time equivalent employees on payroll employed on January 1, 2020, and at the end of the covered period.

Documents may include payroll reports, Bank account statements, and payroll tax forms (e.g. form 941) and state quarterly wage reports and unemployment insurance tax reports that you have reported or will report to the state. 

 Eligible Non – Payroll expenses

Eligible Cost Recommended Supporting Documents 
Business Mortgage Interest Payments, and Business Debt Interest Payments Remember that you must have incurred these debts before February 2020.  You will need to document that the loan existed and document your payments.  For that, you will need lender account statements, from February 2020 and through the covered period.  

Some banks want statements for the month after the covered period as well because this shows that you actually made the last payment in the covered period.  The statement should show interest amounts and interest payments. 


Copy of lender amortization schedule and receipts, account statements showing transfers, or canceled checks verifying eligible payments from the covered period.
Business Rent or Lease Payments Lessor account statements, from February 2020 and from the covered period through one month after the end of the covered period, verifying eligible payments. 

A copy of your current lease agreement and receipts, account statements showing transfers, or canceled checks verifying eligible payments from the covered period.
Business Utility Payments Account statements or a summary page as long as it contains account owner and address, date of service, and amount paid. 

Or Invoices from February 2020 and invoices paid during the covered period, account statements showing payments, or canceled checks.

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