Forgiveness of PPP Loans $150,000 and Under

You must comply with all requirements in the Paycheck Protection Program Rules (Sections 7(a)(36), 7(a)(37), and 7A of the Small Business Act, the PPP interim final rules, and SBA guidance issued through the date of this application), and must attest to its compliance on the Loan Forgiveness Application.  

Those requirements include the following requirements pertaining to use of funds for authorized purposes and maintaining employees:  

• Requested Loan Forgiveness Amount (which may not exceed the principal amount of the PPP loan): 
  
  – must have been used by the Borrower to pay business costs that are eligible for forgiveness (payroll costs to retain employees, business mortgage interest payments, business rent or lease payments, business utility payments, covered operations expenditures, covered property damage costs, covered supplier costs, or covered worker protection expenditures) during the Covered Period; 
  
  – must include payroll costs equal to at least 60% of the Requested Loan Forgiveness Amount; 
  
  – for any owner-employee (with an ownership stake of 5% or more) or self-employed individual/general partner, must not exceed 2.5 months’ worth of compensation received during the year used to calculate the PPP loan amount, capped at $20,833 per individual in total across all businesses; and 
  
  – for loans of more than $50,000 and loan of $50,000 or less to Borrowers that together with their affiliates received First Draw PPP Loans totaling $2 million or more or Second Draw PPP Loans totaling $2 million or more, must meet the requirements of either (A) or (B): (A) is not subject to reductions because the Borrower did not reduce annual salaries 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 either (1) the Borrower did not reduce the number of employees or the average paid hours of employees between January 1, 2020 and the end of the Covered Period or
  (2) the Borrower 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 or guidance issued between March 1, 2020 and December 31, 2020 (or, for a PPP loan made after December 27, 2020, requirements established or guidance issued between March 1, 2020 and the last day of the Covered Period the last day of the Covered Period) 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, related to the maintenance of standards of sanitation, social distancing, or any other work or customer safety requirement related to COVID-19, or (B) the Borrower has included any required reductions as described in SBA Form 3508 and its instructions. 

• The Borrower must accurately calculate the Requested Loan Forgiveness Amount and verify the payments for the eligible costs included in it. 

• If the loan forgiveness application is being submitted for a Second Draw PPP Loan, the borrower must submit or have already submitted all required revenue reduction documentation and have used all First Draw PPP Loan amounts on eligible expenses prior to disbursement of the Second Draw PPP Loan. 

If the funds were knowingly used for unauthorized purposes, the federal government may pursue recovery of loan amounts and/or civil or criminal fraud charges. 

For full program rules, please visit www.sba.gov/ppp.    

To qualify for full loan forgiveness, you must spend at least 60% of your loan amount on payroll costs. The loan amount must be used for eligible expenses as detailed below.  

Payroll Costs: Borrowers are generally eligible for forgiveness for the payroll costs paid and payroll costs incurred during the Covered Period. To calculate eligible payroll costs incurred or paid during the Covered Period, add Cash Compensation, Employee Benefits, and Owner Compensation, as follows: 

• Cash Compensation: The sum of gross salary, gross wages, gross tips, gross commissions, paid leave (vacation, family, medical or sick leave, not including leave covered by the Families First Coronavirus Response Act), and allowances for dismissal or separation paid or incurred during the Covered Period. Do not include qualified wages taken into account in determining the Employer Retention Credit. For each individual employee, the total amount of cash compensation eligible for forgiveness may not exceed an annual salary of $100,000, as prorated for the Covered Period. For example, for an 8- week Covered Period, the maximum is $15,385; for a 24-week Covered Period, the maximum is $46,154. You can only include compensation of employees who were employed by the Borrower at any point during the Covered Period and whose principal place of residence is in the United States. 

• Employee Benefits: The total amount paid by the Borrower for: 
  
  1. Employer contributions for employee group health, life, disability, vision, or dental insurance, including employer contributions to a self-insured, employer-sponsored group health plan, but excluding any pre-tax or after-tax contributions by employees. Do not add contributions for these benefits made on behalf of a self-employed individual, general partners, or owner-employees of an S-corporation, because such payments are already included in their compensation. 
  
  2. Employer contributions to employee retirement plans, excluding any pre-tax or after-tax contributions by employees. Do not add employer retirement contributions made on behalf of a self-employed individual or general partners, because such payments are already included in their compensation. 
  
  3. Employer state and local taxes paid by the Borrower and assessed on employee compensation (e.g., state unemployment insurance tax), excluding any taxes withheld from employee earnings. 

• Owner Compensation: Any amounts the Borrower paid to owners (owner-employees (with an ownership stake of 5% or more), a self-employed individual, or general partners). For each individual owner in total across all businesses, this amount is capped at (a) $20,833 (the 2.5-month equivalent of $100,000 per year), or (b) the 2.5-month equivalent of the individual’s applicable compensation in the year that was used to calculate the loan amount (2019 or 2020), whichever is lower. 
  
  Payroll costs are considered paid on the day that paychecks are distributed or that the Borrower originates an ACH credit transaction. Payroll costs are considered incurred on the day that the employee’s pay is earned. Payroll costs incurred but not paid during the Borrower’s last pay period of the 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. Count payroll costs that were both paid and incurred only once. Include only payroll costs for employees whose principal place of residence is in the United States. For information on what qualifies as payroll costs, see SBA’s interim final rule posted on January 6, 2021 (86 FR 3692). 

• Nonpayroll Costs: Eligible nonpayroll costs consist of: 
  
  a. covered mortgage obligations: payments of mortgage interest (not including any prepayment or payment of principal) on any business mortgage obligation on real or personal property incurred before February 15, 2020 (“business mortgage interest payments”); 
  
  b. covered rent obligations: business rent or lease payments pursuant to lease agreements for real or personal property in force before February 15, 2020 (“business rent or lease payments”); 
  
  c. covered utility payments: business payments for a service for the distribution of electricity, gas, water, telephone, transportation, or internet access for which service began before February 15, 2020 (“business utility payments”); 
  
  d. covered operations expenditures: payments for any business software or cloud computing service that facilitates business operations, product or service delivery, the processing, payment, or tracking of payroll expenses, human resources, sales and billing functions, or accounting of tracking of supplies, inventory, records, and expenses; 
  
  e. covered property damage costs: costs related to property damage and vandalism or looting due to public disturbances that occurred during 2020 that were not covered by insurance or other compensation; 
  
  f. covered supplier costs: expenditures made to a supplier of goods for the supply of goods that are essential to the operations of the Borrower at the time at which the expenditure is made, and made pursuant to a contract, order, or purchase order in effect prior to the beginning of the Covered Period (for perishable goods, the contract, order, or purchase order may have been in effect before or at any time during the Covered Period); and 
  
  g. covered worker protection expenditures: operating or capital expenditures that facilitate the adaptation of the business activities of an entity to comply with the requirements established or guidance issued by the Department of Health and Human Services, the Centers for Disease Control, or the Occupational Safety and Health Administration, or any equivalent requirements established or guidance issued by a State or local government, during the period starting March 1, 2020 and ending on the date on which the national emergency declared by the President with respect to the Coronavirus Disease 2019 (COVID-19) expires related to maintenance standards for sanitation, social distancing, or any other worker or customer safety requirement related to COVID-19, but does not include residential real property or intangible property. 
  
  Eligible nonpayroll costs cannot exceed 40% of the total forgiveness amount. An eligible nonpayroll cost must be either 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. Count nonpayroll costs that were both paid and incurred only once. 

Throughout the PPP process, Congress and the agencies running the program have continued to revise the program and published updated guidance. These changes may impact your loan and forgiveness amount, and, as a PPP borrower, you are responsible for monitoring these developments. Links to these resources can be found in the Paycheck Protection Program Resources section on the PPP Loan Forgiveness page.

Please note that the SBA directs borrowers to retain all employment records/payroll documentation in its files for four years and all other documentation for three years after the date the loan forgiveness application is submitted to the lender (even though you are not required to submit documentation when you apply for forgiveness).  The SBA may request these documents in connection with a regulatory requirements, SBA loan reviews, audits or other purposes as allowed by law. Cape Cod 5 may request these documents on behalf of the SBA. Your failure to provide information requested by SBA may result in a determination of ineligibility for the PPP loan or a denial of your forgiveness application. 

Below are the documents that each borrower must maintain for eligible expenses:  

Payroll: Documentation verifying the eligible cash compensation and non-cash benefit payments from the Covered Period consisting of each of the following:

a. Bank account statements or third-party payroll service provider reports documenting the amount of cash compensation paid to employees. 

b. Tax forms (or equivalent third-party payroll service provider reports) for the periods that overlap with the 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. 

c. Payment receipts, cancelled checks, or account statements documenting the amount of any employer contributions to employee group health, life, disability, vision or dental insurance and retirement plans that the Borrower included in the Requested Loan Forgiveness Amount. 

Nonpayroll: For categories a-c, documentation verifying existence of the obligations/services prior to February 15, 2020 and, for all categories, eligible payments from the Covered Period. 

a. Business mortgage interest payments: 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. 

b. 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. 

c. 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. 

d. Covered operations expenditures: Copy of invoices, orders, or purchase orders paid during the Covered Period and receipts, cancelled checks, or account statements verifying those eligible payments. 

e. Covered property damage costs: Copy of invoices, orders, or purchase orders paid during the Covered Period and receipts, cancelled checks, or account statements verifying those eligible payments, and documentation that the costs were related to property damage and vandalism or looting due to public disturbances that occurred during 2020 and such costs were not covered by insurance or other compensation. 

f. Covered supplier costs: Copy of contracts, orders, or purchase orders in effect at any time before the Covered Period (except for perishable goods), copy of invoices, orders, or purchase orders paid during the Covered Period and receipts, cancelled checks, or account statements verifying those eligible payments. 

g. Covered worker protection expenditures: Copy of invoices, orders, or purchase orders paid during the Covered Period and receipts, cancelled checks, or account statements verifying those eligible payments, and documentation that the expenditures were used by the Borrower to comply with applicable COVID-19 guidance during the Covered Period. 

Other Records: All records relating to the Borrower’s PPP loan, including documentation submitted with its PPP loan application, documentation supporting the Borrower’s certifications as to its eligibility for a PPP loan (including the Borrower’s gross receipt reduction certification for a Second Draw PPP Loan, if applicable), documentation necessary to support the Borrower’s loan forgiveness application, and documentation demonstrating the Borrower’s material compliance with PPP requirements. 

You may apply for loan forgiveness at any point during the term of your PPP loan and have 10 months from the end of your covered period (which begins on the date you received your loan funds and is not more than 24 weeks long).  For example, if you received your PPP loan proceeds on Monday, April 20, 2020, the first day of the Covered Period is Monday, April 20, 2020, and the final day of the Covered Period is any date you select between Sunday, June 14, 2020, and Sunday, October 4, 2020.

For First Draw loans, no documentation is required to be uploaded for the Forgiveness Application.  For Second Draw loans only need to provide documentation to support the 25% reduction in revenue needed to qualify for a Second Draw Loan. 

Before applying, please review the SBA’s simplified forgiveness application (3508S) for full instructions by clicking here.

• Please note that the forgiveness process involves several steps and it can take up to five (5) months after submission of your completed forgiveness application to Cape Cod 5 to receive a final determination on loan forgiveness from the SBA. As long as you apply within 10 months of the end of your forgiveness or covered period, you will have to make no loan payments while awaiting the SBA decision (interest will continue to accrue on the entire loan amount. Accrued interest will be forgiven on the portion of the loan that is forgiven).   

• Once you submit your completed forgiveness application to Cape Cod 5, we will review your application and supporting documents and then send the authorized signer a link to sign the forgiveness application via DocuSign (this review can take up to 60 days). After the initial review, if there are questions or follow-up information is needed, you will receive a message in the secure portal.    

• Once the initial review is completed, the package is electronically signed and returned by the borrower, the authorized signer will be sent a link to electronically sign the forgiveness application. Then, Cape Cod 5 will submit your loan application to the SBA. The SBA will have 90 days to review and notify Cape Cod 5 of their response.   

• Cape Cod 5 will then notify you when we hear from the SBA on the loan forgiveness decision (and the due date for the first payment on any unforgiven portion of the loan amount).