Loan forgiveness
How does the Economic Aid Act, signed into law on December 27, 2020, change the process for Economic Injury Disaster Loan (EIDL) Advance deductions?
The Economic Aid Act repealed the deduction of EIDL Advances from loan forgiveness amounts. According to guidance from the SBA:
- The SBA will no longer deduct EIDL Advances from forgiveness amounts remitted to lenders, effective December 29, 2020.
- For those loans where SBA has already deducted an EIDL Advance from a forgiveness remittance submitted to a lender, the SBA will automatically remit a reconciliation payment to that lender for the previously-deducted EIDL Advance amount, plus interest through the remittance date.
- Bank of America will apply any reconciliation funds received from the SBA due to a previously-deducted EIDL Advance to the balance of the impacted PPP loan and communicate updated balance and payment information to the client.
- To the extent you have repaid your outstanding PPP, which included a previously-deducted EIDL Advance amount, Bank of America will refund you this amount upon receipt of reconciliation funds received from the SBA.
How does new legislation change the PPP loan forgiveness process?
Legislation signed into law December 27, 2020, known as the Economic Aid Act, contained the following changes:
- You now have the option to select a covered period which ends on a date that is at least 8 weeks following the date of loan disbursement, and not more than 24 weeks after the date of loan disbursement
- Includes provisions that expand the list of allowable and forgivable expenses, which apply to existing PPP loans for which a borrower has not yet received forgiveness
The Paycheck Protection Program Flexibility Act, signed into law on June 5, 2020 contained the following requirements:
- Your deferral period, during which payments on your loan will be deferred, will commence on the date on which your PPP loan was funded and end on (i) the date on which the amount of forgiveness as determined under section 1106 of the CARES Act is remitted to the Bank (or the date the SBA notifies us that no forgiveness is allowed) or (ii) the date which is ten (10) months after the last day of your “covered period” (as determined in accordance with Section 1106 of the CARES Act), if you have not applied for forgiveness by such date.
- You must use at least 60% of funds for eligible payroll costs to qualify for full loan forgiveness, down from 75%
- You can use up to 40% of funds for eligible nonpayroll costs, up from 25%
For additional details, please visit the SBA website.
When can I apply for loan forgiveness?
The simplified SBA Form 3508S is now available, in addition to the revised SBA Form 3508EZ and SBA Form 3508 applications. Eligible clients will receive an email with a link to access our loan forgiveness application when it becomes available to them.
As a reminder, based on the latest updates from the SBA, you now have more time to gather your documents and prepare your application. The timeframe for applying for loan forgiveness in the promissory note no longer applies.
For additional assistance with PPP loan forgiveness documentation, view our documentation guide.
How do I determine which application form I should use?
If your PPP loan is $150,000 or less, you will apply for loan forgiveness online through Bank of America using the simplified SBA Form 3508S.
If your PPP loan is more than $150,000, you will apply for loan forgiveness online through Bank of America using one of the following forms:
- PPP EZ Loan Forgiveness Application (SBA Form 3508EZ)—for borrowers who can check at least one of the two boxes set forth in the application instructions.
- PPP Loan Forgiveness Application (SBA Form 3508) — for borrowers who do not meet the requirements for using Form 3508EZ
For additional assistance with PPP loan forgiveness documentation, view our documentation guide
Do I need an Online Banking ID to access my PPP loan forgiveness application online?
Yes, you need a profile set up for CashPro, our digital banking solution.
If you don’t have one set up, please contact your Bank Representative.
How can I apply for PPP loan forgiveness if I cannot locate or deleted the email with instructions?
When you sign into CashPro and navigate to the PPP status page, you will see your Actions required and Forgiveness status. If you are eligible at this time to apply for loan forgiveness, you will see a link under Actions required titled “Apply for or decline forgiveness.” Once your application is submitted, the Forgiveness status will indicate where you are in the loan forgiveness process. You may also contact your Bank Representative for assistance.
How can I withdraw my current PPP loan forgiveness application so I can reapply with the 3508S?
If you have started but not yet submitted your PPP loan forgiveness application using the 3508 or 3508EZ, you may have the option to change to the 3508S within the PPP loan forgiveness application. If you are not presented with this option while completing your application, or need additional assistance, please contact your bank representative.
If you have already submitted your PPP loan forgiveness application using the 3508 or 3508EZ, please contact your bank representative.
If I elect to use the SBA's new loan forgiveness application (Form 3508S), will I be required to submit documentation?
The latest guidance from the SBA states for first draw PPP loan forgiveness applications using the S form, documentation does not need to be uploaded, however, you are required to retain all records relating to your PPP loan and may be required to submit such documentation to the SBA, upon request.
For second draw PPP loan forgiveness applications, you may be required to provide revenue reduction documentation if your loan was $150,000 or less and you did not provide such revenue reduction documentation prior to your forgiveness application.
The SBA requires borrowers using Form 3508 and Form 3508 EZ to submit documentation in connection with their loan forgiveness application. You will not be eligible to receive loan forgiveness without supporting documentation.
For detailed information on the application, including Covered Periods, the type of costs that are eligible for forgiveness, and what documentation you will need to submit in connection with your application, please visit the U.S. Treasury and SBA websites.
For additional assistance with PPP loan forgiveness documentation, view our documentation guide.
How long do I have to apply for loan forgiveness?
The PPP rules currently provide that you may submit a loan forgiveness application at any time after the end of your Covered Period and before the maturity date of your loan, as long as you have an outstanding balance on your loan. However, we understand the SBA may be changing the deadline to apply for PPP loan forgiveness.
Please check with sba.gov for the latest guidance on your forgiveness application window.
Please note that your PPP loan deferral period will end prior to your maturity date. If you applied for forgiveness prior to your deferral period, you will need to begin making payment on any unforgiven amount once the SBA has made a decision on your forgiveness application. If you have not applied for forgiveness prior to your deferral period, you will need to start making payments at the end of your deferral period.
I paid off my PPP loan – am I still eligible for forgiveness on that loan?
You may still be eligible to apply for forgiveness. Please contact us so that we may further assist you. We can be reached at 888.717.4033 on Monday through Friday from 8 a.m. to 8 p. Eastern.
When does my PPP loan deferral period end? / When do I need to start making payments on my PPP loan?
The Paycheck Protection Program Flexibility Act of 2020 (Flexibility Act) extended the deferral period for borrower payments of principal and interest on all PPP loans to the earlier of:
- The date that the SBA remits the forgiven amount to the lender or notifies the lender that no forgiveness is allowed; and
- The date that is 10 months after the last day of the forgiveness “covered period” (as defined under the PPP), if the Borrower has not applied for forgiveness by such date.
- Most covered periods will be for a period of 24 weeks. Thus, this would be the date that is 10 months plus 24 weeks following the loan disbursement date.
NOTE: Interest will continue to accrue during the payment deferral period. After the deferral period, clients with an unforgiven balance will receive repayment letters indicating when their first payment is due.
Can I apply for forgiveness prior to the end of my elected Covered Period?
No. The current SBA application for PPP loan forgiveness contains certain representations and documentation requirements that relate to the end of the Covered Period. As a result, you will only be able to apply for loan forgiveness through Bank of America once your Covered Period has ended.
Can I submit a paper application for PPP loan forgiveness?
Applications for PPP loan forgiveness at Bank of America must be submitted digitally through our online PPP loan forgiveness application portal. We will not accept paper loan forgiveness applications.
How can I prepare to apply for loan forgiveness?
Once you determine which SBA Loan Forgiveness Application Form you will use, we recommend that prior to applying online through Bank of America for PPP loan forgiveness, you carefully review and fill out the applicable form, and gather any required documentation specified in the instructions:
For borrowers applying for loan forgiveness using SBA Form 3508EZ and SBA Form 3508, please note:
- During the PPP loan forgiveness process you may need to resubmit documentation that you provided during the PPP loan application process.
- Our online forgiveness application portal for 3508EZ and 3508 forms are not currently able to accept the following non-payroll costs, which were recently added by the SBA to the list of forgivable expenses: covered operational expenditures, covered property damage costs, covered supplier costs and covered worker expenditures. We will begin accepting these costs in several weeks and will email you when these updates are made. If you want to claim these expenses, you may want to wait until the updated online application is available.
For additional assistance with PPP loan forgiveness documentation, view our documentation guide.
Who determines the amount of loan forgiveness?
The U.S. Treasury and Small Business Administration (SBA) are responsible for the rules of the program, which determine the amount of loan forgiveness you may receive. This can include full, partial or no forgiveness.
We encourage you to visit the U.S. Treasury and SBA websites for the most up-to-date program rules and guidance.
How is the amount of owner compensation that is eligible for loan forgiveness determined? What if I am an owner of multiple businesses with multiple PPP loans?
The applicable Interim Final Rules and FAQs provide that the amount of compensation of owners who work at their business that is eligible for forgiveness depends on the business type and whether the borrower is using an eight-week or 24-week Covered Period. The amount of loan forgiveness requested for owner-employees and self-employed individuals’ payroll compensation is capped at the lesser of $20,833 per individual or the 2.5-month equivalent of their applicable compensation in 2019 (whichever is lower) in total across all businesses in which he or she has an ownership stake. For borrowers that received a PPP loan before June 5, 2020 and elect to use an eight-week Covered Period, this cap is $15,385 per individual or the 8 week equivalent of their applicable compensation in 2019 (whichever is lower) in total across all businesses in which he or she has an ownership stake. If their total compensation across businesses that receive a PPP loan exceeds the cap, owners can choose how to allocate the capped amount across different businesses.
Is interest on unsecured credit eligible for loan forgiveness?
As of August 4, 2020, in Frequently Asked Questions (FAQs) on PPP Loan Forgiveness, the SBA stated that payments of interest on business mortgages on real or personal property (such as an auto loan) are eligible for loan forgiveness. Interest on unsecured credit is not eligible for loan forgiveness because the loan is not secured by real or personal property. Although interest on unsecured credit incurred before February 15, 2020 is a permissible use of PPP loan proceeds, this expense is not eligible for forgiveness.
What utility payments are eligible for forgiveness?
Business payments for a service for the distribution of electricity, gas, water, transportation, telephone or internet access for which service began before February 15, 2020.
Are rent payments made to related parties eligible for forgiveness?
In an Interim Final Rule on Treatment of Owners and Forgiveness of Certain Nonpayroll Costs originally posted on August 24, 2020, the SBA has stated rent payments to related parties are eligible for forgiveness so long as 1) “the amount of loan forgiveness requested for rent or lease payments to a related party is no more than the amount of mortgage interest owed on the property during the Covered Period that is attributable to the space being rented by the business” and 2) “the lease and mortgage were entered into prior to February 15, 2020.” Borrowers must provide mortgage interest documentation to substantiate these payments. And where the payor requests forgiveness for amounts paid to a related party, the related party cannot also request forgiveness for that same amount. Additionally, “[w]hile rent or lease payments to a related party may be eligible for forgiveness, mortgage interest payments to a related party are not eligible for forgiveness.”
Are any individuals with an ownership stake in a PPP borrower exempt from application of the PPP owner-employee compensation rule when determining the amount of their compensation that is eligible for loan forgiveness?
In an Interim Final Rule on Treatment of Owners and Forgiveness of Certain Nonpayroll Costs originally posted on August 24, 2020, the SBA clarified that, for C- and S-Corp borrowers, owners with less than a 5% ownership stake are exempt from the owner-compensation cap.
Are amounts attributable to the business operation of a tenant or sub-tenant of the PPP borrower or, in the context of home-based businesses, household expenses, eligible for forgiveness?
No. In an Interim Final Rule on Treatment of Owners and Forgiveness of Certain Nonpayroll Costs originally posted on August 24, 2020, the SBA has stated that the amount of loan forgiveness requested for nonpayroll costs may not include any amount attributable to the business operation of a tenant or sub-tenant of the PPP borrower or, for home-based businesses, household expenses. The IFR provides four examples:
1) If a borrower rents a building for $10,000/month and subleases a portion of the building for $2,500/month, only $7,500 of the rent is an eligible non-payroll expense.
2) If a borrower has a mortgage on a building and leases 25% of the fair market value of the building to other businesses, only 75% of the mortgage expense is eligible.
3) If a borrower operates out of a shared rental, it must prorate rent and utilities as it did on its 2019 tax filings (or, for new businesses, as it will on its expected 2020 tax filings).
4) If a borrower works out of their home, only the share of covered expenses that were deductible on their 2019 tax filings are eligible for forgiveness (or, for new businesses, expected 2020 tax filings).
I am planning to (i) sell all or part of my interest in my company, or (ii) merge my company with another company or (iii) sell some or all of the assets of my company to a third party, before my PPP loan is forgiven or paid in full. Do I need to notify the Bank or the SBA?
The SBA published a Procedural Notice on Changes Of Ownership on October 2nd, which is available on the SBA website. This notice requires, in most situations, that the PPP lender provide confirmation to the SBA of your satisfaction of the requirements set forth in the Procedural Notice. Please contact your relationship manager as soon as possible, but at least 10 business days before the proposed date of the sale or merger, so that we can provide assistance in setting up an escrow account if needed and answer other questions you may have as you go through this process.
How can I decline my invitation to apply for PPP loan forgiveness?
If you wish to decline PPP loan forgiveness:
• Sign in to CashPro using the same credentials you used to submit your application.
• From the CashPro Menu, select “Paycheck Protection Program”
• Once on the PPP loan status page, under Actions required, select “Review and submit or Decline Forgiveness”
• Click the “Withdraw or decline loan forgiveness” button at the top right of the application
Where should I go if I have questions?
For detailed information on the application, covered periods, the types of costs that are eligible for forgiveness, and what documentation you will need to submit in connection with your application, please visit the U.S. Treasury and SBA websites.
For additional assistance with PPP loan forgiveness documentation, view our documentation guide.
For questions related to PPP, please contact your Bank Representative.
Bank of America is committed to supporting you and all of our clients during this challenging period.
Important Note: The Small Business Administration and the Department of Treasury continue to provide additional guidance concerning the Paycheck Protection Program. Thus, Bank of America makes no representation that information contained herein is up-to-date or complete. Before submitting a request for loan forgiveness, borrowers may wish to visit the SBA, U.S. Treasury Assistance for Small Businesses, and U.S. Treasury FAQ websites for the latest information and guidance related to the Paycheck Protection Program.
Information as of 04/04/2022.
