What You Can Do Right Now to Prepare for PPP Loan Forgiveness


Brett Wheatley


Reviewed by


February 18, 2021

This article is Tax Professional approved


On August 10th, 2020 the Small Business Association (SBA) officially opened up its Paycheck Protection Program (PPP) forgiveness application portal. However, most PPP borrowers are unable to apply for forgiveness due to the reopening of loan applications for PPP 2.0. In the meantime, you can still start taking action now.

What's Bench?
Online bookkeeping and tax filing powered by real humans.
Learn more
Friends don’t let friends do their own bookkeeping. Share this article.
Tired of doing your own books?
Try Bench

The majority of PPP lenders have paused their individual forgiveness applications. Borrowers need to apply for forgiveness through their specific PPP lender, who then send the application to the SBA for further processing and the final forgiveness decision.

Many borrowers feel like they are stuck in a PPP forgiveness limbo waiting on their lender to finally open up applications. While you wait for this to happen, there are still some steps you can take to ensure that your eventual PPP forgiveness application process goes smoothly. You also can review everything you need to know about the PPP and other relief programs in our complete overview.

Below you will find some recommended steps that can help you ensure that you are as prepared for your PPP forgiveness application as possible.

Review PPP rules

Take time to review the main rules of the PPP. How much of your loan you are able to get forgiven is based on how closely you followed these rules. By reviewing these rules, you can prepare yourself with how much of your PPP loan you should expect to be forgiven. You will also gain an understanding of what types of questions that the application will likely be asking you.

Below is a quick summary of the main PPP rules that you should be aware of. For a closer look at each of these rules, you can check out this dedicated article. If you applied for the PPP as a self-employed individual these rules work a little different for you. For a refresher on how PPP forgiveness works for the self-employed, check out this Bench article on owner’s compensation replacement (OCR).

1. The eligible expenses

The PPP must be used on payroll, utilities, rent, and mortgage interest only. Any PPP funds not used on these specified eligible expenses, will not be forgivable!

2. 60/40 rule

To achieve full PPP forgiveness, you must spend at least 60% of your PPP on payroll costs. Payments towards independent contractors do not count as a payroll cost. If you spend less than 60% of your PPP on payroll costs, then the amount of your PPP you are able to get forgiven will decrease proportionally.

3. Staffing requirement

In order to receive full PPP forgiveness, you must also maintain the same number of employees on payroll throughout the entirety of your PPP covered period. This number of employees must be the same or greater than the number of employees you had in one of the following two time periods.

  • February 15, 2019 to June 30, 2019, OR
  • and January 1, 2020 to February 29, 2020.

If the number of employees you have on payroll has decreased during your covered period, then the amount of your PPP that you are able to get forgiven will decrease proportionally. You can read more on FTE requirements for the PPP here.

4. Pay requirements

You must maintain 75% of the total salary of each employee. This requirement will be individually assessed for every employee that did not receive more than $100,000 in annualized pay in 2019.

If an employee’s salary decreases by more than 75%, then your forgivable PPP amount will decrease proportionately.

Review your expenses

Now that you have reviewed the main rules of the PPP, use this refreshed lens to take a look at how you spent your PPP funds, during your covered period.

If your expenses were used within the guidelines outlined in the above section, you should be in an excellent position for PPP forgiveness.

If you are having trouble understanding your expenses, there are places you can turn for help. A bookkeeping service (like Bench) can help you understand your expenses, and evaluate them based on the PPP requirements.

If you are working with a payroll provider, they can also be helpful in determining if you are meeting the 60/40 rule along with the staffing and pay requirements.

Take a look at the SBA PPP forgiveness forms

Which PPP forgiveness form do I use? (horizontal flow chart)

Take some time to review the standardized SBA PPP forgiveness form. There are two different versions of the SBA PPP forgiveness form called the 3508 form and the 3508EZ form. The main difference between these is the 3508 is the standard form, while the 3508EZ form is a simplified version of the form meant for self-employed individuals.

When you apply for PPP forgiveness, the form you use to apply might look different. This is because each lender’s PPP forgiveness application may work differently. By taking a look at these forms you will be able to understand what kind of questions you should be prepared to answer on your application.

If you are interested in learning more here is our step-to-step guides for completing the 3508 form, and the 3508EZ form.

If you are able to understand and complete the SBA forgiveness form, then you are in a great position for your PPP forgiveness application!

Collect all necessary documentation

Make sure you have all of the necessary documentation available. Exactly what type of documentation you will need to supply will depend both on your business type and on the lender. However, here is a general list of the type of documents you may need to supply:

  • Documents verifying the number of full-time equivalent employees on payroll and their pay rates, for the periods used to verify you met the staffing and pay requirements:
  • Payroll reports from your payroll provider (Learn more about how payroll providers are supplying PPP specific reports)
  • Payroll tax filings (Form 941)
  • Income, payroll, and unemployment insurance filings from your state
  • Documents verifying any retirement and health insurance contributions
  • Documents verifying that your eligible interest, rent, and utility payments were active in February 2020
  • Documents verifying your eligible interest, rent, and utility payments (canceled checks, payment receipts, account statements)
  • If you applied for the PPP as a self-employed individual you will need to supply one of the following depending on your business entity type:
  • 2019 Schedule C for sole proprietors
  • 2019 Schedule K-1 for partnerships
  • 2019 1099-MISC Forms for independent contractors

Talk to your lender & look out for important emails

When your lender’s PPP forgiveness application opens you will likely receive an email notifying you that they are now open for forgiveness applications.

Many lenders also have a specific webpage dedicated to PPP forgiveness. This can be a great resource to make sure that you are up to date on any news or changes for your specific PPP forgiveness application process.

Keep up to date

It is still possible that the SBA will make some changes to the overall PPP forgiveness application process. To make sure you are best prepared for your forgiveness application, it is imperative to stay informed. One easy way to do this is to read the Bench blog, which is constantly updated with important PPP updates.

Is it ok to wait to apply for forgiveness?

If you wish, you can wait to apply for forgiveness! Technically, you have five years from your PPP origination date to apply for forgiveness. However, if you want to avoid paying any principal or interest payments on your PPP loan you have 10 months after your covered period ends to apply (although interest starts accruing at the origination). Once you apply for forgiveness, you will not be required to make any PPP payments until after you receive a forgiveness decision from the SBA.

Additional resources

All things Paycheck Protection Program

All other things COVID relief

This post is to be used for informational purposes only and does not constitute legal, business, or tax advice. Each person should consult his or her own attorney, business advisor, or tax advisor with respect to matters referenced in this post. Bench assumes no liability for actions taken in reliance upon the information contained herein.
Friends don’t let friends do their own bookkeeping. Share this article.

Join over 140,000 fellow entrepreneurs who receive expert advice for their small business finances

Get a regular dose of educational guides and resources curated from the experts at Bench to help you confidently make the right decisions to grow your business. No spam. Unsubscribe at any time.