Loan Forgiveness Application Guide

As a PPP borrower, you are responsible for understanding the rules and guidance relative to the program issued by the SBA and Treasury. Links to these resources can be found in the Paycheck Protection Program Resources section on the PPP Loan Forgiveness page.

Borrowers are eligible for loan forgiveness for the following costs: 

• Eligible payroll costs. Borrowers are generally eligible for forgiveness for the payroll costs paid and payroll costs incurred during the Covered Period (“payroll costs”). Payroll costs are considered paid on the day that paychecks are distributed or 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. 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. 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). 

• Eligible nonpayroll costs. Nonpayroll costs eligible for forgiveness 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 either must be 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.

The SBA has stated that you may apply for forgiveness at any time during the term of your loan (and if you apply within 10 months of the last date of your covered or forgiveness period). We encourage borrowers to review the guidelines below when deciding when to apply:  

• Availability of documentation – Prior to beginning your forgiveness application, please gather all your supporting documentation, as it will be required to submit your application for review. Some of these documents may not be available immediately, and having full documentation available prior to starting your digital application is recommended.    

• Use of funds – To maximize loan forgiveness, we recommend that you wait until the end of the covered period or when you have used all the funds you expect to use on expenses eligible for forgiveness.   

• Staffing levels – If you will need to prove you have maintained or reinstated staffing levels, you will need to apply after the date of your covered period or date of full reinstated staffing. Please note that this does not apply to businesses that had COVID–related business restrictions due to compliance with governmental guidance.

Loans over $150,000 may use the simplified 3508EZ Forgiveness Application Form if they meet at least ONE of the below criteria: 

The Borrower did not reduce annual salary 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. (For purposes of this statement, “employees” means only those employees that did not receive, during any single period during 2019, wages or salary at an annualized rate of pay in an amount more than $100,000.); 

AND 

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. 

• Ignore reductions that arose from an inability to rehire individuals who were employees on February 15, 2020 if the Borrower was unable to hire similarly qualified employees for unfilled positions on or before December 31, 2020 (or, for a PPP loan made after December 27, 2020, the last day of the Covered Period). 

• Also ignore reductions in an employee’s hours that the Borrower offered to restore and the employee refused. See 85 FR 33004, 33007 (June 1, 2020) for more details. 

OR 

The Borrower did not reduce annual salary 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. (For purposes of this statement, “employees” means only those employees that did not receive, during any single period during 2019, wages or salary at an annualized rate of pay in an amount more than $100,000,); 

AND 

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) 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. 

If you cannot attest to one of the criteria above, you must complete the full Forgiveness Application (Form 3508).   

Please use the below links to view full application instructions from the SBA.  When you apply via the Cape Cod 5 PPP portal, you will select and complete your forgiveness application in the portal. 

PPP EZ Loan Forgiveness Form (Form 3508EZ) 

PPP Loan Forgiveness Application Form (Form 3508) 

Current documentation requirements include: verification of employees on payroll and pay rates, payment receipts, cancelled checks or other documents for non-payroll expenses (such as mortgage, lease and utility expenses).

Required documentation will need to be uploaded at the time of your application. Each Forgiveness application also lists documentation that you are required to maintain and that does not need to be submitted. Please refer to the SBA application for additional details:

PPP EZ Loan Forgiveness Form (Form 3508EZ) 

PPP Loan Forgiveness Application Form (Form 3508) 

• 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).