• Juanita Schwartzkopf

What Should You Know About PPP Loan Forgiveness?

Many companies are questioning how to receive confirmation of the forgiveness of their Payroll Protection Program (“PPP”) loan, and are concerned about what they need to do and when they need to do it. There are no hard and fast answers right now but here is what we know.


Supporting Information


There is no doubt companies will need to be able to provide the following:


-Proof of employee counts.

-Proof of payroll expenditures.

-If payroll costs do not support 100% of the loan amount, then proof of:

  • Benefits paid.

  • Utilities paid.

  • Rent paid.

Each situation will be different, but that base level of information will be necessary, and will probably support the majority of the forgiveness requests.


Forgiveness Applications


A company applies for PPP loan forgiveness from its PPP loan lender. Some lenders have set up portals that they are asking borrowers to use to submit the forgiveness applications, and some are in the process of setting those up.


The SBA has published its application requirements. Review of this application will help a borrower identify what a lender will require.


This link will take you to the SBA application.


This second link will take you to the SBA application instructions.


Please be aware that lenders have their own internal systems they are establishing to facilitate PPP loan forgiveness. The SBA documents provide a solid foundation for a company to gather required information and be ready when their lender is able to accept forgiveness applications.


What is the timeline to forgiveness?


The most critical deadline a company needs to be aware of is the ten months after the end of the loan’s covered period time clock. Loan forgiveness must be applied for by the end of 10 months after the end of the covered period.


The next question is then what happens. Here is a rough timeline.

If the lender does not approve forgiveness, the borrower has 30 days from notification of denial of forgiveness to appeal to the SBA.


The SBA has indicated it will review all forgiveness requests over $2 million. If the PPP loan is forgiven, the SBA has a five year statute of limitations to reassess forgiveness.


Tax Impacts


The tax impacts are evolving and borrowers will need to discuss the approval and reporting requirements with their tax professionals to assess all impacts of PPP loan forgiveness, including estimated tax impacts.


Financial Reporting


The GAAP treatment of PPP loan forgiveness also continues to evolve and has not been clearly defined. Borrowers will need to work with their CPA firm relative to end of year financial reporting impacts.


Key Takeaways


Companies that have received PPP loans should do the following:


1. Gather the supporting information to validate how the PPP loan proceeds were used.

2. Determine if the covered period will be 8 weeks or 24 weeks.

3. Keep in contact with the PPP lender to understand the lender’s processes.

4. Review the SBA materials to better understand the forgiveness approval process.

5. Ensure all supporting information is maintained for at least five years after the forgiveness is approved.

6. Discuss the tax impacts with tax professionals.

7. Discuss the financial impacts with the outside accounting firm preparing audited or reviewed financial statements for the company.


Call us!


We can help review a borrower’s financial statements and work with you to develop strategies to put your borrower in a better position for the future. Contact us if we can be of any assistance in evaluating options or applying for loan forgiveness.


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