Paycheck Protection Program Forgiveness: Now is the Time to Prepare

In early April, as many small businesses around the world closed their doors, furloughed employees, or scrambled to shift to a purely digital work environment, the U.S. Small Business Administration (SBA) and U.S. Treasury Department rolled out a government-backed lifeline to help entrepreneurs and small businesses. The Paycheck Protection Program (PPP) was established to provide access to capital to eligible small businesses at an attractive rate – with the intent to make these loans forgivable, under certain conditions. The program has been fluid since its inception and the forgiveness component is no exception.

If you are a PPP loan recipient, here are some key things to remember as you prepare to apply for loan forgiveness:

  • Eligibility: Ensure PPP funds are being used for eligible expenses, including using at least 60 percent on payroll costs. Other eligible business expenses include mortgage interest, rent, lease payments, and utilities based on current SBA criteria for PPP loan forgiveness.
  • Where to apply: Participating financial institutions will have their own loan forgiveness process and application for the PPP. Be sure to check in with the lender of your PPP loan, before you apply for forgiveness. Once your application is complete, your PPP lender will submit it to the SBA. SBA will then notify the financial institution once the determination of forgiveness eligibility is complete.
  • Understand your covered period – Know your covered period and confirm your documents correspond to the applicable dates, and make sure you have spent your PPP funds on eligible costs. The covered period is 24-weeks (168 days), unless you received your loan before June 5, 2020, then you can choose 8 weeks (56 days) or 24 weeks (168 days) (ending December 31, 2020, at the latest).
  • Supporting documents: Gather your supporting documents for payroll and non-payroll expenses. This may include third-party payroll service provider reports, account statements for employee healthcare insurance and retirement plans, tax forms, lender account statements on mortgage(s) or other business debt, rent or lease payment statements, and utility statements.
  • Consider the tax implications: Prior to applying for forgiveness, consider engaging a licensed financial advisor and/or tax advisor. While the federal government has exempted PPP loans from taxation, most states have yet to offer guidance on whether loan forgiveness will be taxable.

In October, the U.S. Small Business Administration announced a more simplified loan forgiveness process for small businesses that received a PPP loan for $50,000 or less. At Wells Fargo, we received SBA guaranties for more than 194,000 PPP loans, with an average loan amount of $54,000. 78% of these loans were for $50,000 or less and will be able to use a more simplified PPP loan application to apply for forgiveness. PPP loan forgiveness is key to helping businesses reopen and to get our economy moving forward through the pandemic.

Minority-owned businesses, including those owned by Asian-Americans, have been disproportionately impacted by the pandemic according to a recent study by the U.S. Chamber of Commerce. At Wells Fargo, we’re committed to helping these business owners navigate the various financial options to weather the uncertainty. While the federal government weighs additional economic stimulus packages, alternative lifelines are available through grants from participating non-profits provided by the Open for Business Fund, a fund created using all gross PPP fees.

For the most up-to-date information on the PPP and details on loan forgiveness, visit the U.S. Small Business Administration.


Andrew Moy is an executive vice president and division executive for Wells Fargo’s Commercial Banking Diversified Sector Management. Based in Charlotte, North Carolina, he leads specialized industry teams, including Investor Real Estate, Global Advisory, Waste and Recycling, Heavy Equipment Dealer Group, Employee Stock Ownership Plan financing (ESOP), Defense, Aerospace, and Technology Services (DATS), and Diverse Segments, all focused on serving the financial needs of business banking and middle-market banking customers.

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