To Ask or Not To Ask for Forgiveness (for the PPP)

This year has been one for the books, for many, quite literally. As a result of COVID-19, many small businesses made the decision to apply for assistance with the Paycheck Protection Program (PPP) to help tide them over during lean periods. As the initial PPP program term is nearing its end, the question you may now be faced with is, “Should I apply for forgiveness right away or wait?”

First, let’s discuss eligibility. Borrowers may be entitled to loan forgiveness if the funds were used for eligible payroll costs, payments on business mortgage interest payments, rent, and/or utilities during either the 8 or 24-week period after disbursement. A borrower can apply for forgiveness once they have used all loan proceeds any time up to the maturity date of the loan. You can work with your bank to verify legitimate of covered expenses to help determine the proper amount of forgiveness. And, if you work with a payroll processing company you may be able to request a CARES Act payroll package to accurately document your payroll expenses, lessening the work you need to do internally. 

Some businesses are preparing for the forgiveness process by staying on top of the necessary documentation needed to file but not initiating the application immediately. Many have been told by their accountants that funds received from PPP, which totaled less than $150,000, may be automatically forgiven and turned into a grant. This legislation has yet to be confirmed so that leaves many in a holding pattern. Additionally, there are some tax deductibility issues at the heart of the decision for small businesses. Forgiveness of the PPP loan is tax-free, but borrowers won’t be able to claim tax deductions for the business expenses covered by forgiven loan proceeds. We recommend speaking with your tax professional soon to plan a strategy regarding forgiveness so you’re prepared to move ahead when the time is right. 

Other businesses are “putting the time in” and getting their forgiveness application submitted so they can reserve their place in the SBA’s queue. As more and more applications are being received, the SBA is taking longer to review and process forgiveness requests. If you’ve made the decision to submit your paperwork, we recommend doing it expeditiously

Whichever group you fall into, keep in mind that if borrowers do not apply for forgiveness within 10 months after the last day of the covered period, then PPP loan payments can be no longer deferred. Borrowers will then have to begin making loan payments to their PPP lender. According to the SBA, any balance not forgiven will become a loan at 1% for up to 2 years. Make sure you keep in touch with your lender so you can initiate the forgiveness process quickly in the event there is no blanket forgiveness. And, be mindful of your PPP maturity date, you would not want not miss the opportunity to apply for forgiveness because the date slipped by you. In our opinion, it’s prudent for all businesses to make a plan for forgiveness, despite the path you ultimately end up taking.  

If you’re anxious to get the forgiveness process started, and many Second Wind members already have, the following are steps you can take to begin:

  • Contact your PPP lender and complete the correct application
  • Compile your documentation related to covered expenses
  • Submit the forgiveness application and documentation to your PPP Lender
  • Continue to communicate with your Lender throughout the process


Please continue to keep in touch with Second Wind and let us know how you are doing. We are happy to lend advice and counsel related to PPP forgiveness or any other topics. 

Additional resources:

Paycheck Protection Program Loan Forgiveness
PPP Loan Forgiveness: What CPAs Should Be Doing Now


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