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Tips on Applying for Paycheck Protection Program Loan Forgiveness

We appreciate the opportunity to support you through the SBA’s Paycheck Protection Program (PPP). Below, please find useful Q&A to help you prepare to apply for loan forgiveness.

 

Which PPP loan forgiveness application should I use?

There are three SBA applications for PPP loan forgiveness: Form 3508, Form 3508EZ and Form 3508S. To use Form 3508EZ, businesses must meet certain criteria. You must meet at least one of the three criteria. To determine if you are eligible, refer to the Checklist for Using Form 3508EZ. Form 3508S is a simpler application for borrowers that received PPP loans of $50,000 or less. For this application, an authorized representative on behalf of the borrower must certify to seven criteria.

 

How can I prepare for the loan forgiveness application process?

Once you determine which SBA Loan Forgiveness Application you’ll use, we recommend that you complete the paper application and gather all the necessary documentation detailed in the instructions. You will be required to upload this documentation when applying for loan forgiveness. The paper application will be a helpful resource when applying through Cadence Bank’s online application portal.

 

 

When can I apply for loan forgiveness?

Based on the latest guidance from the SBA, you may submit a loan forgiveness application any time on or before the maturity date of your loan, including prior to the end of the Covered Period if you have used all of the loan proceeds for which you are requesting forgiveness and once you have all your supporting documentation ready. Note, if your loan funded prior to June 5, 2020, you may choose an 8-week or 24-week covered period. Stipulations apply. Visit the SBA PPP website for further guidance.

 

Do I need to complete the PPP Loan Necessity Questionnaire?

The SBA announced it will review all PPP loans to borrowers that, together with their affiliates, received loans of $2 million or greater to ensure loan necessity. Each of these borrowers must complete a Loan Necessity Questionnaire and submit it, along with the required supporting documents, to the lender servicing their PPP loan. This includes documents originally required to be maintained but not submitted to the lender.

 

There are two versions of the questionnaire:

 

If you meet this requirement, you may wish to download the appropriate questionnaire in preparation for the SBA review. Please note that we will notify you when the SBA requires your completed Loan Necessity Questionnaire, at which time you will have 10 business days to respond with the completed form and supporting documentation.

 

What is the difference between the Covered Period and Alternative Payroll Covered Period?

According to SBA guidance as of September 16, 2020: “The Covered Period is either (1) the 24-week (168-day) period beginning on the PPP loan disbursement date, or (2) if the borrower received its PPP loan before June 5, 2020, the borrower may elect to use an eight-week (56-day) Covered Period. For example, if the borrower is using a 24-week Covered Period and received its PPP loan proceeds on Monday, April 20, the first day of the Covered Period is April 20 and the last day of the Covered Period is Sunday, October 4. In no event may the Covered Period extend beyond December 31, 2020. Borrowers with a biweekly (or more frequent) payroll schedule may elect to calculate eligible payroll costs using the 24-week (168-day) period (or for loans received before June 5, 2020 at the election of the borrower, the eight-week (56-day) period) that begins on the first day of their first pay period following their PPP loan disbursement date (i.e., the “Alternative Covered Period”). For example, if the borrower is using a 24-week Alternative Payroll Covered Period and received its PPP loan proceeds on Monday, April 20, and the first day of its first pay period following its PPP loan disbursement is Sunday, April 26, the first day of the Alternative Payroll Covered Period is April 26 and the last day of the Alternative Payroll Covered Period is Saturday, October 10. In no event may the Alternative Payroll Covered Period extend beyond December 31, 2020.”

 

IMPORTANT CLARIFICATION: While it is acceptable to apply for Forgiveness before the end of the 24-week Covered Period, the Covered Period entry MUST still reflect the FULL 8- or 24-week period, even if all the funds were used in a period less than 24 weeks. The Covered Period DOES NOT end on the date you spent all the PPP proceeds.

 

Sample dates for clarification:

 

8-week Example 24-week Example
PPP Disbursement Date 4/30 4/30
Covered Period 4/30 – 6/25 4/30 – 10/15

 

What documentation is required to apply for forgiveness?

For both SBA loan forgiveness applications, you are required to submit payroll and nonpayroll documents.

 

Payroll Documentation:

 

FORM 3508: Payroll documentation must verify the eligible cash compensation and non-cash benefit payments from the Covered Period or the Alternative Payroll Covered Period. These documents are outlined on page 6 of Form 3508 Instructions and consist of:

  • Bank account statements or third-party payroll service provider reports documenting the amount of cash compensation paid to employees.
  • Tax forms (or equivalent third-party payroll service provider reports) for the periods that overlap with the Covered Period or the Alternative Payroll Covered Period:
    • Payroll tax filings reported, or that will be reported, to the IRS (typically Form 941); and
    • State quarterly business and individual employee wage reporting and unemployment insurance tax filings reported, or that will be reported, to the relevant state.
  • Payment receipts, cancelled checks or account statements documenting the amount of any employer contributions to employee health insurance and retirement plans that you included in your forgiveness amount (PPP Schedule A, lines (6) and (7)).

 

FORM 3508EZ: Payroll documents for Form 3508EZ are outlined on page 4 of Form 3508EZ Instructions and consist of:

  • Bank account statements or third-party payroll service provider reports documenting the amount of cash compensation paid to employees.
  • Tax forms (or equivalent third-party payroll service provider reports) for the periods that overlap with the Covered Period or the Alternative Payroll Covered Period:
    • Payroll tax filings reported, or that will be reported, to the IRS (typically Form 941); and
    • State quarterly business and individual employee wage reporting and unemployment insurance tax filings reported, or that will be reported, to the relevant state.
  • Payment receipts, cancelled checks or account statements documenting the amount of any employer contributions to employee health insurance and retirement plans that you included in your forgiveness amount (PPP Schedule A, lines (6) and (7)).
  • If you checked only the second box on the checklist on page 1 of the Form 3508EZ Instructions, the average number of full-time equivalent employees on payroll that you employed on January 1, 2020 and at the end of the Covered Period.

 

FORM 3508S: Payroll documentation must verify the eligible cash compensation and non-cash benefit payments from the Covered Period or the Alternative Payroll Covered Period. These documents are outlined on page 3 of Form 3508S Instructions and consist of:

  • Bank account statements or third-party payroll service provider reports documenting the amount of cash compensation paid to employees.
  • Tax forms (or equivalent third-party payroll service provider reports) for the periods that overlap with the Covered Period or the Alternative Payroll Covered Period:
    • Payroll tax filings reported, or that will be reported, to the IRS (typically Form 941); and
    • State quarterly business and individual employee wage reporting and unemployment insurance tax filings reported, or that will be reported, to the relevant state.
  • Payment receipts, cancelled checks or account statements documenting the amount of any employer contributions to employee health insurance and retirement plans that you included in the forgiveness amount.

 

Nonpayroll Documentation:

 

Nonpayroll documentation must verify the existence of the obligations/services prior to February 15, 2020 and eligible payments from the Covered Period or the Alternative Payroll Covered Period.

 

FORM 3508: These documents are outlined on pages 6 – 7 of the Form 3508 Instructions and consist of:

  • Business mortgage interest:
    • Copy of lender amortization schedule and receipts or cancelled checks verifying eligible payments from the Covered Period; or
    • Lender account statements from February 2020 and the months of the Covered Period through one month after the end of the Covered Period verifying interest amounts and eligible payments.
  • Business rent or lease payments:
    • Copy of current lease agreement and receipts or cancelled checks verifying eligible payments from the Covered Period; or
    • Lessor account statements from February 2020 and from the Covered Period through one month after the end of the Covered Period verifying eligible payments.
  • Business utility payments:
    • Copy of invoices from February 2020 and those paid during the Covered Period and receipts, cancelled checks or account statements verifying those eligible payments.

 

FORM 3508EZ: Nonpayroll documents for Form 3508EZ are outlined on page 4 of the Form 3508EZ Instructions and consist of:

  • Business mortgage interest:
    • Copy of lender amortization schedule and receipts or cancelled checks verifying eligible payments from the Covered Period; or
    • Lender account statements from February 2020 and the months of the Covered Period through one month after the end of the Covered Period verifying interest amounts and eligible payments.
  • Business rent or lease payments:
    • Copy of current lease agreement and receipts or cancelled checks verifying eligible payments from the Covered Period; or
    • Lessor account statements from February 2020 and from the Covered Period through one month after the end of the Covered Period verifying eligible payments.
  • Business utility payments:
    • Copy of invoices from February 2020 and those paid during the Covered Period and receipts, cancelled checks or account statements verifying those eligible payments.

 

FORM 3508S: Nonpayroll documents for FORM 3508S are outlined on page 3 of the Form 3508S Instructions and consist of:

  • Business mortgage interest:
    • Copy of lender amortization schedule and receipts or cancelled checks verifying eligible payments from the Covered Period; or
    • Lender account statements from February 2020 and the months of the Covered Period through one month after the end of the Covered Period verifying interest amounts and eligible payments.
  • Business rent or lease payments:
    • Copy of current lease agreement and receipts or cancelled checks verifying eligible payments from the Covered Period; or
    • Lessor account statements from February 2020 and from the Covered Period through one month after the end of the Covered Period verifying eligible payments.
  • Business utility payments:
    • Copy of invoices from February 2020 and those paid during the Covered Period and receipts, cancelled checks or account statements verifying those eligible payments.

 

FTE Documentation:

 

For Form 3508, borrowers may also submit FTE documentation. These details are outlined on page 6 of the Form 3508 Instructions.

 

What documentation am I required to maintain (but not required to submit to the lender)?

 

What is the maximum file size that may be uploaded to the PPP Loan Forgiveness Portal?

The SBA has set limits on the size of files it will accept when applying for PPP loan forgiveness. To ensure your files will be accepted by the SBA, please make sure your files do not exceed 10MB and are saved in one of the following file formats: pdf, xls, xlsx, csv, doc, docx, jpg or png. If you cannot reduce the original file size, we recommend breaking apart the file into several smaller files to upload individually. The SBA also requires that files be categorized. To streamline this process, we recommend that you include a description in the file title (e.g., Payroll – ADP 09-30-2020, Utilities – GA Power 09-30-2020).

 

When must payroll costs be incurred and/or paid to be eligible for loan forgiveness?

Payroll costs paid or incurred during the Covered Period or Alternative Payroll Covered Period are eligible for forgiveness.

  • Payroll costs are considered paid on the day that paychecks are distributed, or you originate an ACH credit transaction.
  • Payroll costs incurred during your last pay period of the covered period or the alternative payroll covered period are eligible for forgiveness if paid on or before the next regular payroll date; otherwise, payroll costs must be paid during the covered period (or alternative payroll covered period) to be eligible for forgiveness.
  • Payroll costs are generally incurred on the day the employee’s pay is earned (i.e., on the day the employee worked). For employees who are not performing work but are still on your payroll, payroll costs are incurred based on the schedule established by you (typically, each day that the employee would have performed work).
  • The covered period will not always align with your payroll cycle:
    • Borrowers with a bi-weekly (or more frequent) payroll cycle may elect to use an alternative payroll covered period that begins on the first day of the first payroll cycle in the covered period and continues for either (a) eight weeks, in the case your PPP loan funded prior to June 5, 2020 and you’ve elected to use an eight-week covered period, or (b) 24 weeks, in the case of all other borrowers.
    • If payroll costs are incurred during this alternative payroll covered period but paid after the end of the alternative payroll covered period, such payroll costs will be eligible for forgiveness if they are paid no later than the first regular payroll date thereafter.

 

When must nonpayroll costs be incurred and/or paid to be eligible for Forgiveness?

A nonpayroll cost is eligible for forgiveness if it was:

  • Paid during the Covered Period; or
  • Incurred during the Covered Period and paid on or before the next regular billing date, even if the billing date is after the Covered Period.

 

I have applied for forgiveness and provided all required documentation. When can I expect a final loan forgiveness decision?

Once we’ve received your completed application and all required documentation, we will process your application and provide our recommendation to the SBA within 60 days. Once the SBA receives our recommendation, it will make a final loan forgiveness decision—including how much, if any, loan forgiveness will be granted—within 90 days.

 

If I apply for loan forgiveness but the SBA does not grant forgiveness in full, when will my first payment of principal and interest be due?

Your first payment is not due until the SBA determines your loan forgiveness eligibility, the amount of the loan to be forgiven, if applicable, and remits their portion of the loan payment to Cadence Bank. We will keep you apprised as to when your first payment will be due in the event forgiveness is not for the full amount. Alternately, you may pay back the unforgiven portion of your loan at any time without a prepayment penalty.

 

Where can I find additional information?

For more information about PPP loan forgiveness, please visit the SBA PPP website. You may also find helpful guidance in the Paycheck Protection Program FAQ and on the U.S. Department of the Treasury website.

 

 

 

PLEASE NOTE: This information is based on guidance from the SBA as of October 8, 2020. The Small Business Administration and the U.S. Department of the Treasury are continuing to issue guidance concerning the Paycheck Protection Program. Therefore, Cadence Bank makes no representation that the information we have provided herein is current.  

 

 

 

 

 

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