PPP Loan Forgiveness

The SBA published a new EZ version of the forgiveness application that applies to borrowers that:

  • Are self-employed and have no employees; OR
  • Did not reduce the salaries or wages of their employees by more than 40%, and did not reduce the number or hours of their employees; OR
  • Experienced reductions in business activity as a result of health directives related to COVID-19, and did not reduce the salaries or wages of their employees by more than 25%.

The EZ application requires fewer calculations and less documentation for eligible borrowers.

Details regarding the applicability of these provisions are available in the instructions to the new EZ application form.

Both applications give borrowers the option of using the original 8-week covered period (if their loan was made before June 5, 2020) or an extended 24-week covered period.

These changes will result in a more efficient process and make it easier for businesses to realize full forgiveness of their PPP loan.

PPP loan borrowers can have their loans forgiven if they use the money for designated expenses, including payroll costs, and interest on mortgage, rent, and utility payments.

You will owe money when your loan is due if you use the loan amount for anything other than payroll costs, mortgage interest, rent, and utilities payments over the 24 weeks (or 8 weeks) after receiving your funds.

  • Number of Staff: Your loan forgiveness will be reduced if you decrease your full-time employee headcount. 
  • Level of Payroll: Your loan forgiveness will also be reduced if you decrease salaries and wages by more than 40% for any employee that made less than $100,000 annualized in 2019. 
  • Re-Hiring: You have until December 31, 2020 to restore your full-time employment and salary levels for any changes made between February 15, 2020 and April 26, 2020.
  • Safe Harbors for inability to rehire employees: If in good faith, you can document 1) written offers to rehire individuals who were employees on February 15, 2020; or 2) an inability to hire similarly qualified employees for unfilled positions by December 31, 2020, your loan will be forgiven.

Additionally, forgiveness will not be reduced for failure to maintain employment levels if the organization is able to document an inability to return to the same level of business activity as existed prior to February 15,2020, due to compliance with COVID-19-related guidance for sanitation, social distancing, or worker or customer safety requirements from the Health and Human Services (HHS), the Centers for Disease Control and Prevention (CDC), or the Occupational Safety and Health Administration (OSHA) between March 1 and December 31, 2020.

As part of your application, you need to certify in good faith that:

  • Current economic uncertainty makes the loan necessary to support your ongoing operations.
  • The funds will be used to retain workers and maintain payroll or to make mortgage, lease, and utility payments.
  • You have not and will not receive another loan under this program.
  • You will provide to the lender documentation that verifies the number of full-time equivalent employees on payroll and the dollar amounts of payroll costs, covered mortgage interest payments, covered rent payments, and covered utilities for the covered period after getting this loan.
  • Loan forgiveness will be provided for the sum of documented payroll costs, covered mortgage interest payments, covered rent payments, and covered utilities. Due to likely high subscription, it is anticipated that not more than 40% of the forgiven amount may be for non-payroll costs.
  • All the information you provided in your application and in all supporting documents and forms is true and accurate. Knowingly making a false statement to get a loan under this program is punishable by law.
  • You acknowledge that the lender will calculate the eligible loan amount using the tax documents you submitted. You affirm that the tax documents are identical to those you submitted to the IRS. And you also understand, acknowledge, and agree that the lender can share the tax information with the SBA’s authorized representatives, including authorized representatives of the SBA Office of Inspector General, for the purpose of compliance with SBA Loan Program Requirements and all SBA reviews.

Businesses must document qualifying expenses to receive forgiveness. Without proper documentation, it could be difficult for you when it comes time to apply for forgiveness.

Five Tips To Set-up Documentation

  1. Use a simple Excel spreadsheet to track your qualifying expenses. This will allow you to see your progress in real-time and project where you will be at the end of the eight-week period. Think of an eight-week projected cash flow forecast; this discipline should give you similar visibility. To substantiate the amounts listed in the spreadsheet, gather and organize your backup documentation.
  2. Employ good third-party documentation. For example, evidence payroll costs using an outside payroll provider report, coupled with a bank statement, reflecting the payroll funds coming out of your account.
  3. Capture electronic transactions and use them as appropriate documentation, but watch that you’re treating them as you would their paper counterparts. You’ll need to have the same level of detail you’d find in a paper invoice.
  4. Gather and organize your information. As we are still unsure how the SBA wants borrowers to provide documentation, it will be much easier for you if you have an organized paper trail evidencing that PPP loan funds paid for qualified expenses already collected your data.
  5. Track expenses in the general ledger. If you are using a cloud-based accounting system, such as QuickBooks Online (QBO), set up an additional class (QBO) to record your expenses. The general ledger tracking will be a good summary, but you will still need to include the details.

How to Document Qualifying Expenses

Payroll Costs

  • If you use an outside payroll processing company, save a payroll report reflecting gross wages paid for each payroll incurred during the period.
  • If you process payroll internally, use the pages of the payroll report that reflect total gross wages paid.
  • Separate the employees (including owners taking a salary) who are paid more than $100,000 annually, or $15,385 during the eight-week period, as qualified gross payroll is limited to $100,000 per employee.
  • Collect invoices, statements, payment advices, evidence of automatic bank debits, etc., to validate and document other costs under the definition of “payroll costs” defined as:
    – Cash tips or equivalent
    – vacation, parental, family medical, or sick leave (excluding payments for emergency paid sick leave or expanded family and medical leaves)
    – Separation or dismissal pay
    – Group health insurance
    – Retirement benefits
    – State or local payroll tax (but not federal payroll tax)
  • For state and local taxes, such as unemployment taxes, the same payroll reports as above should be adequate.
  • Keep an electronic copy of your bank statement and reconcile the amounts from payroll reports, invoices, etc., to the entries on the statement.
  • In some cases, you may want to use Federal Form 940 or 941 and summarize the actual portion of the amount on the form that was paid during the eight-week period.

Other Qualifying Expenses

  • These expenses will likely be limited to 40% of the PPP loan amount.
  • Use invoices, statements, payment advices, etc., to validate the costs for rent, utilities, and mortgage interest.
  • Copies of rent, lease, and mortgage loan agreements may be required to validate commitments that were in place prior to February 15, 2020.
  • If you have canceled checks that match the invoices, make copies to use as documentation along with the invoice.
  • Keep an electronic copy of your bank statement and reconcile the amounts from invoices, etc., to the entries on the statement.

Other Considerations

  • Employee headcount — Keep track of hours worked for hourly employees. Maintain copies of timecards or pull a report from an electronic timekeeping system. The hours should be tracked by week for the eight-week period.Capture any new employees hired, regardless of whether they are hourly or salaried. W-4 forms may be required as supporting documentation for the new hires.
  • Comparing wages — If you have reduced the wages for any of your employees from what they were in the period prior to February 15, 2020, you must track those changes, as they could limit the forgiveness amount. Consider using the same spreadsheet you are using to track payroll costs by week to document these changes. The reductions should be supported by a comparison of a payroll report from the period prior to February 15, 2020 and from a pay period within the eight-week period of qualifying expenses.

Following these tips should be a good start to help the forgiveness process go smoothly. Keep the documentation organized electronically in a secure location on your server so you can quickly retrieve these items to meet final loan forgiveness guidelines. The goal should be to have all the documentation at your fingertips to help make it easier for you to substantiate and maximize your loan forgiveness.


  1. I found this information incredibly interesting. My parents both own their own businesses and I think it’s extremely important to stay informed on how this current pandemic affects businesses and what options they have to stay successful.

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