PPP loan has been given to the businesses to protect their company revenue loss during the covid -19 pandemic. SBA is now actively providing an opportunity to get full forgiveness of the loan amount borrowed in the first or second draw terms. If you are among those businesses that come under PPP loan eligibility, you need to think of how to spend your money on the right assets in order to get loan forgiveness on SBA terms and conditions.

Are you wondering what are prerequisites for application or are you eligible to apply? Here in this guide, we are going to help you through every step and all the details you need to know about.

A short disclaimer here is that Paycheck Protection Program is ending on May 31, 2021, and existing borrowers may be eligible for PPP Loan Forgiveness.

With that in mind, let’s start with whether you are eligible for this financial relief or not.

Fulfill Basic Conditions of PPP Loan Forgiveness


There are a few conditions and criteria that fall under PPP loan forgiveness eligibility and you need to ensure to follow all the requirements. Here are the basics to be followed that SBA considers in forgiving loans of the companies:

  1. Use 100% of the funds: Check whether you’ve used the given fund amount from the loan on eligible costs within the covered period.
  2. Expanse coverage of 8-24 weeks: The second draw of PPP Loan fully loan forgiveness is eligible for those that are incurred over an 8-24 weeks period starting from the date of receiving.
  3. 60% of the fund for payroll only: About 60% of the loan must be used for payroll costs. This 60% forgivable amount will be calculated in proportion to the total amount you are provided with. For calculation of payroll costs, simply divide your total loan by 0.6. The employees with more than $100,000 annual payout or those who are living outside the US can’t be covered in payroll costs.

What Reduces PPP loan Forgiveness Costs

reduces-ppp-loan-forgiveness Costs

As mentioned above, at least 60% of the fund must be spent over payroll costs to qualify for PPP loan forgiveness and the remaining 40% of the amount can be spent on other expenses including Mortgage interest, Rent, Utilities, Operations expenditures, Property damage costs, Supplier costs, and Worker protection.

If in case any expanse crosses the mentioned percentage will surely result in a reduction in the percentage of the forgiveness. Let’s see two ways where you might be not lacking to get a full 100% forgiveness:

1. Spending more than 40% on non-payroll costs:

If the spending on payroll costs is less than 60%, then you’ll end up reducing your amount of forgiveness. For instance, on a $100,000 PPP loan, spending just $45,000 on payroll during your covered period means you can have $75,000 of the loan forgiven.

2. Laying Off your employees or reducing salary:

If a company lays off their employees (means putting their employees off from their job) or reducing their salary, the PPP loan will only be partially forgiven. The forgiveness will be reduced in proportion to the number of the full-time equivalent employees you laid off.

How to Apply for PPP Loan Forgiveness


As a borrower, you can apply for PPP loan forgiveness once you’ve used all the loan proceeds. You’ll be forgiven by your lender depending upon the conditions.

Borrowers can apply any time up to the maturity date of the loan which means if you do not apply for forgiveness within 10 months of the covered period, the loan payments will no longer be acceptable for forgiveness. Consequently, you will need to face the borrowed loan as payments to your lender.

Considering you are an eligible candidate, it’s time to check out to know the procedure of applying for PPP Loan forgiveness successfully:

  • Review your lender for their authentic participation in direct forgiveness through SB

If your lender has been participating in the direct forgiveness, you use the SBA forgiveness portal to apply. However, if your lender is not participating in direct SBA, you can apply through SBA Form 3508, SBA Form 3508EZ, or SBA Form 3508S. Concern with a lender for further guidance on the application submission process.

  • Document All Loan Expense

The spending of your PPP loan can be widely ranged, including supplier costs and health, and employee safety measures. To forgive all your expenses, you’ll still need all the documents documenting your expenses and showing the cost.

Moreover, for payroll, you’ll need documents that verify the number of employees on the payroll as well as their salaries and wages. To provide reliable payroll reports, you can find different providers to verify retirement and health insurance contributions.

You’ll need to show canceled checks, payment receipts, or account statements for your other non-payroll expenses.

Complete your loan forgiveness application and submit it via the SBA direct forgiveness portal or via your lender with the required supporting documents.

  • Monitor the progress of your application

SBA or your lender will notify you of the review and their decision when your application undergoes the review. That means you have the right to request certain SBA loan review decisions. Your lender must be responsible to notify you of the forgiveness amount paid by SBA and the date on which your first payment will be due, if applicable.



Q . Whether I can apply for forgiveness for PPP Round 1 or PPP Round 2?

A. You can apply for forgiveness for both Round 1 and 2

Q . Can You Still Apply for Forgiveness?

A.Yes, you can check out the official website of SBA to process your application. Also, get in touch with your lender to get help from their side.

Q . How do I fully forgive a PPP loan?

A. If you meet the SBA criteria, you can qualify for fully PPP Loan forgiveness.

  1. Spend all of the funds on eligible expenses 8-24 weeks after you receive the loan – eligible expenses include 60% spending on payrolls and 40% on operating costs.
  2. Don’t lay off your company staff or employees.
  3. Don’t cut out the salary of your full-time staff.