Paycheck Protection Program Loan Forgiveness

Trying to determine PPP loan forgiveness eligibility? Let us help.

Virginia Community Capital (VCC) is here to help you understand Paycheck Protection Program (PPP) loan forgiveness eligibility requirements and get the process started.

Webinar: Paycheck Protection Program Loan Forgiveness Explained

This free webinar was presented in partnership by Virginia Community Capital, the U.S. Small Business Administration, and the Small Business Development Center Network. Click the button below to watch the recording.

Speakers include:

- Matthew Ho, Assistant Vice President, Small Business Loan Officer - Virginia Community Capital
- Carl Knoblock, District Director - Virginia Small Business Administration (SBA)
- Timm Johnson, Director - Mason Small Business Development Center (SBDC)
- Mike Austin, Access to Capital Specialist - Hampton Roads Small Business Development Center (SBDC)

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How does PPP loan forgiveness work?

First, it is important to review how PPP loans can be used. Acceptable uses of PPP loan proceeds include:

  • Payroll costs (as defined in the CARES Act)
  • Costs related to the continuation of group health care benefits during periods of paid sick, medical, or family leave, and insurance premiums
  • Mortgage interest payments (but not mortgage prepayments or principal payments)
  • Rent payments
  • Utility payments
  • Interest payments on any other debt obligations that were incurred before February 15, 2020; and/or refinancing an SBA EIDL loan made between January 31, 2020, and April 3, 2020

Both nonprofit and for-profit PPP loan recipients may be eligible for loan forgiveness, including the full principal amount of the loan and any accrued interest if certain criteria are met. The amount of loan forgiveness will depend, in part, on the total amount spent over the covered period on the costs listed above. Additional guidelines can be found here.

Flexibility for Forgiveness

In early June 2020, the Paycheck Protection Program Flexibility Act (PPPFA) was signed into law. On June 10, 2020, the Small Business Administration and Treasury Department released an interim final rule to reflect changes made by the PPPFA (H.R. 7010). This rule codified several program changes:

  • Confirms that borrowers who use less than 60 percent of their PPP loan amount for payroll costs during the covered period for forgiveness still will be eligible for partial loan forgiveness.
  • Extends the end date of the “covered period” for a PPP loan from June 30, 2020, to Dec. 31, 2020.
  • Provides a five-year maturity for loans made on or after June 5, 2020, and provides an option for loans made prior to that date to extend maturity from two years to five years at the mutual agreement of the borrower and lender.
  • Extends the loan forgiveness period from eight weeks to 24 weeks. (For loans made prior to June 5, 2020, borrowers may opt to keep the forgiveness period at eight weeks.)
  • Clarifies that if a borrower submits its forgiveness application within 10 months of the end of the loan forgiveness period, the borrower will not have to make any payments on the loan before the date SBA remits the forgiven amount to the lender.
  • Reiterates that the last day a lender can obtain an SBA loan number for a PPP loan is June 30, 2020.

SBA also released a three-page “EZ” Paycheck Protection Program loan forgiveness application requiring less documentation and fewer calculations than previously required. Form 3508EZ applies to borrowers who meet any one of these three criteria:

  • Applied for the PPP loan as self-employed, an independent contractor, or a sole proprietor with no employees.
  • Did not reduce salary or wages for any employee by more than 25%, and did not reduce the number or hours of their employees (excepting laid-off employees who refused an offer to return).
  • Did not reduce salary or wages for any employee by more than 25% during the covered period and experienced reductions in business activity as a result of health directives related to COVID-19.

Where do I start?

Similar to our PPP application process, VCC will require all of our PPP borrowers to submit a complete document package. A complete package will include the PPP Loan Forgiveness Application, either Form 3508EZ or Form 3508, and supporting documentation verifying eligible use of proceeds, as well as VCC’s PPP Forgiveness Documentation Checklist to confirm you have submitted all required information.

We will be utilizing a forgiveness calculator and application creator provided by Reliant Business Valuation to help you automate the PPP Loan Forgiveness Application. This application can be found here. This will be the only version of the form VCC will accept.

Please send all loan forgiveness packages and questions to PPP-forgiveness@vccva.org.

If you need one-on-one technical assistance in completing the application or you have additional questions regarding PPP forgiveness, we recommend you contact your local Small Business Development Center to set up an appointment.

Please note: The SBA puts the onus on the Borrower to determine eligible use of proceeds, and to document them accordingly. For this reason, VCC is only able to direct the Borrower to guidelines issued by the SBA.

PPP Loan Forgiveness Resources

Please note: While PPP funding is still available to borrowers nationwide, VCC has stopped accepting loan applications so that we may shift our focus to the forgiveness process. For more information, please don’t hesitate to reach out to your VCC contact.