SBA Paycheck Protection Program (PPP) Loan Forgiveness 


What Is PPP Loan Forgiveness?

Paycheck Protection Program (PPP) loans, created under the CARES Act, allow for potential loan forgiveness on eligible costs incurred during the 24-week period (8-week period for certain loans at the choice of borrower) after a borrower’s PPP funds are disbursed, defined under the CARES Act as the “covered period.”

We understand that loan forgiveness under the PPP loan program is important to your business and AgCarolina Farm Credit's local and dedicated lending team is here to assist you.
 

 

Good News about Forgiveness

During 2020 PPP rule changes have increased the covered period up to 24-weeks, increased the eligible expenses that the PPP funds can be used for, reduced the amount of expenses that must be utilized for payroll cost down to 60% of total PPP loan, and created a streamlined forgiveness process for PPP loans of $150,000 or less.

You may apply for loan forgiveness anytime during the term of your PPP loan; however, if you do not apply within 10-months following your covered period you will have to begin making payments on the debt. 

If you are ready to apply for loan forgiveness review the information below and contact your local loan officer to start the process. 
 

Streamlined Forgiveness for PPP Loans of $150,000 or less (Form 3508S)

If your PPP loan is less than $150,000, you only need to complete a simple one page application and are not required to submit any documentation to support the request.  SBA's Loan Forgiveness Website has all the details on the process and the Forgiveness Application/Instructions for the simplified forgiveness process if your loan is $150,000 or less.  A borrower that, together with its affiliates, received PPP loans totaling $2 million or more cannot use this form. 

If you would like to request a version of this forgiveness application that you can electronically sign, contact your local loan officer or email PPP@agcarolina.com requesting the application. 

 

Forgiveness for PPP Loans over $150,000

If your PPP loan is over $150,000, you may utilize a simplified forgiveness application (Form 3508EZ) if you meet at least one of the following criteria:

  • The business did not reduce annual salary or hourly wages of any employee by more than 25 percent during the Covered Period compared to the most recent full quarter before the Covered Period and did not reduce the number of employees or the average paid hours between January 1, 2020 and the end of the Covered Period: or 
  • The business did not reduce annual salary or hourly wages of any employee by more than 25 percent during the Covered Period compared to the most recent full quarter before the Covered Period and the business was unable to operate during the Covered Period at the same level of business activity as before February 15, 2020 due to compliance with requirements established by the Secretary of Health and Human Services, the Director of the Centers for Disease Control and Prevention or the Occupational Safety and Health Administration.  
     

Timeline of the Forgiveness Process

Document Retention

Be sure to take note of the required record retention period in the Forgiveness Instructions.  SBA does require you to maintain documentation to support the use of PPP funds for a number of years following the forgiveness or repayment of your PPP loan.
  

Eligible Costs for Loan Forgiveness

The following costs and expenses are eligible for loan forgiveness under the Paycheck Protection Program. These costs must be paid or incurred during the covered period. 

- Payroll costs: 

  1. Compensation in the form of salaries, wages, commissions or similar compensation up to $100,000
  2. Payment of cash tips or equivalent
  3. Payment for vacation, parental, family, medical, or sick leave
  4. Allowance for dismissal or separation
  5. Payment of retirement benefits
  6. Group vision, dental, disability, or life insurance
  7. Payment of state or local taxes assessed on the compensation of employees

- Healthcare costs related to the continuation of group healthcare benefits during periods of sick, medical, or family leave, as well as insurance premiums.

- Mortgage interest payments (but not prepayment or payment of the mortgage principal)

- Rent

- Utilities

- Interest on any other debt obligations incurred before February 15, 2020

- Refinancing an SBA EIDL received between January 31, 2020, and April 3, 2020

- Covered expenditures such as business software or cloud computing services that facilitate:

  1. business operations
  2. product or service delivery
  3. the processing, payment or tracking or payroll expenses, human resources, sales, and billing functions
  4. accounting or tracking of supplies, inventory, records, or expenses

- Covered property damage costs

- Covered supplier costs

- Covered worker protection expenditures

 

For questions regarding this application process, please contact ppp@agcarolina.com or contact your loan officer.  In addition to SBA Guidance on Loan Forgiveness, you may wish to consult your CPA or financial advisor for assistance in completing the forgiveness application process.