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Lessons Learned with Paycheck Protection Loan Forgiveness

To date, McKonly & Asbury has prepared and assisted clients with numerous loan forgiveness applications, resulting in well over $10 million dollars in loan forgiveness. Our staff has prepared all three forms (3508, 3508EZ and 3508S) for clients and worked with numerous banks to process the information through their bank portals.

Through our work, we have encountered a few matters in the process that we thought would be important to share with business owners as they request forgiveness of loans.

Make sure your lender has the most updated information on their portal.

Recently, we encountered an instance where the lender’s portal asked a number of questions around Full Time Equivalent (FTE) counts and salary reductions in order to assess if the borrower should file the long-form 3508 or could file the 3508EZ form. Upon initial review of the facts and circumstances of the forgiveness application, the client qualified for the 3508EZ form. However, the lender sent our client access to their portal to file the 3508 form. Upon further review with the lender, it was discovered that the lender was not working from the most recent Small Business Administration (SBA) loan forgiveness application, but instead was working with old requirements.

When filing your loan forgiveness application, we recommend that you compare any request for information with the most up-to-date SBA loan forgiveness application to ensure that your lender is working with the most up-to-date legislation and requirements. This will avoid having to provide more information than necessary and ensure that your forgiveness application is processed accurately, timely, and correctly.

Loans less than $150,000 do not require submission of documentation but you need to maintain it.

The SBA has projected that over 80% of loans are less than $150,000. With the amendments to the CARES Act, these loans can now be processed for forgiveness using borrower certifications that the loan proceeds were used in accordance with the rules of the loan. More specifically the rules of no less than 60% used for qualifying payroll costs and no more than 40% used for other qualifying operating expenses. No FTE or salary requirement information needs to be provided as part of the loan forgiveness application and no documentation of use of funds, such as payroll reports or invoices, need to be provided to the lender to support the use of the loan amount.

While filing the 3508S form is rather quick and simple, it is important to note that the instructions for filing this form does note that documentation to support the loan must still be maintained by the borrower. As noted in the application:

The Borrower must 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, and permit authorized representatives of SBA, including representatives of its Office of Inspector General, to access such files upon request.”

When filing the 3508S form, be mindful to maintain this documentation and ensure that upon providing your certification to the loan requirements that you have met all requirements in accordance with the CARES Act and its amendments.

Support for the 25% reduction in revenues needs to be provided with forgiveness application.

Second round PPP loans were based upon showing a quarter-over-quarter or year-over-year revenue reduction of at least 25%. When filing the loan application for the second round PPP loan, this calculation needed to be performed. However, the details around the calculation were not required to be provided for the lender to approve the loan.

Upon submission of the loan forgiveness application, this information must be provided to prove the economic need for the loan. Borrowers should make sure this information has been maintained and appropriate documentation is available to support the revenue reduction calculation.

Balance payroll cost for PPP forgiveness with the Employee Retention Credit (ERC).

During the first round of PPP, the easiest way to seek loan forgiveness was to use 100% payroll cost. At the time, if you received a PPP loan you could not qualify for the ERC. With the expansion of the ERC to allow for payroll costs that are not used in forgiveness of the PPP loan, this has opened up many options for businesses to use payroll costs for both programs. The key is that the same payroll dollars cannot be used for both programs. Whether you have a first round PPP loan or a second round PPP loan, make sure to assess how much payroll you need to apply for loan forgiveness if you also qualify under the requirements of the ERC. Ensuring that you leave payroll dollars open for the ERC program can help maximize the ability to take advantage of both programs. The best way to do this is to consult with seasoned and experienced professionals, like McKonly & Asbury, who understand the details to ensure your ability to take advantage of both programs.

If you have any questions regarding this article, or how our team can help, contact David B. Blain, CPA, CVA, Partner and Director of Entrepreneurial Services for McKonly & Asbury and leader of the firm’s PPP Consulting Services at


About the Author

David Blain

David is a Partner with McKonly & Asbury. He has a diverse background with experience in both private industry and public accounting, having worked for five years for an international public accounting firm and five years in private i… Read more

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