PPP Loan Forgiveness: What We Know Now
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Last Updated: September 8, 2021 - PPP R2 forgiveness applications available mid September-October
Update on the PPP loan forgiveness application
We are working to roll out an easy loan forgiveness application for eligible borrowers who received a Round 2 PPP loan in 2021. If you have received a Round 2 PPP loan, over the next few weeks (mid-September to October), you’ll be able to apply for forgiveness. We will notify you by email and in your Square Dashboard when your application is ready.
How do I know if I have a Round 1 or Round 2 PPP loan?
If you received a PPP loan in 2020, you have a Round 1 PPP loan.
If you received a PPP loan in 2021, you have a Round 2 PPP loan.
If you received two PPP loans, your first loan is referred to as a “first draw” PPP loan, and second loan is referred to as a “second draw” PPP loan.
What is the difference between the PPP First Draw loan forgiveness application and the Second Draw loan forgiveness application?
The only difference is that for the PPP Second Draw loan forgiveness application, you may need to provide additional revenue reduction documentation. This documentation must establish that your business had a 25% or greater decrease in revenue between 2019 and 2020, or any quarter of 2019 compared to the same quarter of 2020. Keep in mind, you are required to maintain documentation showing you used loan funds for eligible purposes for up to four years after you submit your forgiveness application.
Please note: If you have received a first and second draw PPP loan, you will need to apply for each one individually. You can check to see if your loan forgiveness applications are ready in your Square Dashboard.
What kind of revenue reduction documentation is acceptable?
In order to qualify for forgiveness for your second draw PPP loan, and if your loan is greater than $150k, you will need to provide documentation showing that your business had a 25% or greater decrease in revenue between 2019 and 2020, or any quarter of 2019 compared to the same quarter of 2020. In order for us to verify this information, you will have to submit supporting documentation such as:
Annual statements: 2019 Form 944 and 2020 Form 944; OR 2019 Schedule C and 2020 Schedule C (Form 1040)
Quarterly statements: Form 941s from 2019 and 2020 (preferred), quarterly financial statements or bank statements
I was asked for revenue reduction documentation in my application and I don’t have it, what do I do?
Unfortunately, if you are unable to prove that your business has had at least a 25% reduction in revenue, you are not eligible for forgiveness. This means that the total amount of your second draw PPP loan plus a 1% fixed interest must be repaid over the term of your loan. Please see your loan agreement emailed to you or in your dashboard for more information on your loan terms. Interest starts accruing the day the loan is originated.
Please visit our Paycheck Protection Program FAQ.
When do I need to complete and submit my forgiveness application?
You can apply for PPP loan forgiveness on or before the maturity date of the loan (which is 2 or 5 years from loan origination).
What other documents do I need to submit with my application?
You’ll need to submit documents showing 1) your payroll expenses during the covered period (which can include third-party payroll provider reports, benefit provider account statements, quarterly federal and state tax forms, and payment receipts), and 2) your non-payroll expenses eligible for forgiveness (business mortgage, interest payments, rent or lease payments, utility payments, operations expenses, property damage costs, supplier costs, worker protection expenses). If you use Square payroll, we’ll already have some documents and information pre-filled in your application. You can find a complete list of the documents you’ll need in our Forgiveness Guide.
When do I need to start repaying my loan?
You aren’t required to start making loan repayments until your forgiveness decision is determined. If your loan is not fully forgiven, any unforgiven loan amount will need to be repaid, along with a low, 1% fixed annual interest rate on that amount. You’ll repay through monthly payments automatically debited from your Square linked account.
Note: if you do not apply for forgiveness, your business will need to start repaying its loan about 16 months after receiving the funds.
How can I stay updated about future loan forgiveness changes?
Check back here frequently. We are keeping a close eye on loan forgiveness and will continue to update this page with new information. For more information about forgiveness, see our Forgiveness FAQ.
Last Updated: June 17, 2021- PPP forgiveness application for loans greater than $150,0000 available starting mid July
Update on the PPP loan forgiveness application
For businesses who received a PPP loan greater than $150,000 we expect to begin rolling out forgiveness applications (Form 3508EZ) starting mid July. We will notify you by email and in the Square Dashboard when your application is ready. Until you hear from us, there is nothing you need to do. All eligible borrowers who received PPP loans greater than $150,000 will be able to apply for forgiveness using Form 3508EZ. The SBA EZ forgiveness application is shorter and requires less information to fill out.
You’re eligible to use Form 3508EZ if at least one is true:
You didn’t reduce the salary or wage of employees making under $100,000 a year by more than 25% (compared to the most recent full quarter before the Covered Period), AND you didn’t cut any FTE employees between January 1, 2020 and the end of your Covered Period (other than employees you were unable to rehire and unable to replace with similarly-qualified employees on or before December 31, 2020, or reductions in an employee’s hours that you offered to restore but the employee refused)
You didn’t reduce the pay of employees making under $100,000 a year by more than 25% (compared to the most recent full quarter before the Covered Period), AND you were unable to operate at the same level as before February 15th, 2020 due to COVID-19 mandated health and safety guidelines.
Once the application is available, we’ll ask you a few questions to figure out which form you’re eligible to use. If you’re not eligible to use 3508EZ, and need to fill out and submit Form 3508, it will be available as a PDF file. Access your application via email or on your online Square Dashboard.
When do I need to complete and submit my forgiveness application?
You have up to 10 months after your covered period ends to apply for forgiveness.
What documents do I need to submit with my application?
You’ll need to submit documents showing 1) your payroll expenses during the covered period (which can include third-party payroll provider reports, benefit provider account statements, quarterly federal and state tax forms, and payment receipts), and 2) your non-payroll expenses eligible for forgiveness (business mortgage, interest payments, rent or lease payments, utility payments, operations expenses, property damage costs, supplier costs, worker protection expenses). If you use Square payroll, we’ll already have some documents and information pre-filled in your application. You can find a complete list of the documents you’ll need in our Forgiveness Guide.
When do I need to start repaying my loan?
You aren’t required to start making loan repayments until your forgiveness decision is determined. When repayment does begin, any loan amount that is not forgiven will need to be repaid, along with a low, 1% fixed annual interest rate on the amount not forgiven. You’ll repay through monthly payments automatically debited from your Square linked account.
Note: if you do not apply for forgiveness, your business will need to start repaying its loan within about 16 months of receiving the funds.
How can I stay updated about future loan forgiveness changes?
Check back here frequently. We are keeping a close eye on loan forgiveness and will continue to update this page with new information.
Last updated: February 26, 2021 - PPP forgiveness application for loans $50,000 to $150,0000 available starting March 8, 2021
Update on the PPP loan forgiveness application
For businesses who received a PPP loan $50,000 to $150,000, we expect to begin rolling out forgiveness applications (Form 3508S) starting March 8, 2021. We will notify you by email and in the Square Dashboard when your application is ready. Until you hear from us, there’s nothing you need to do.
All eligible borrowers who received PPP loans up to $150,000 will now be able to apply for forgiveness using Form 3508S. Check your email and Square Dashboard to access your application.
Businesses who received up to $150,000 in PPP funds who can attest they’ve complied with the program requirements can apply for forgiveness without providing any supporting documents.
If your loan is greater than $150,000—or if you and your affiliates received a total of $2 million or more in PPP funds—you aren’t eligible to apply yet. Instead, you’ll complete Form 3508EZ or Form 3508. We will send you a notification via email and in your Square Dashboard when you’re eligible to apply.
When do I need to complete and submit my forgiveness application?
You have up to 10 months after your covered period ends to apply for forgiveness.
When do I need to start repaying my loan?
You aren’t required to start making loan repayments until your forgiveness decision is determined. When repayment does begin, any loan amount that is not forgiven will need to be repaid, along with a low, 1% fixed annual interest rate on the amount not forgiven. You’ll repay through monthly payments automatically debited from your Square linked account.
Note: if you do not apply for forgiveness, your business will need to start repaying its loan within about 16 months of receiving the funds.
How will I know when the application has been released by Square Capital?
We will notify you by email and in the Square Dashboard when your application is ready. Until you hear from us, there’s nothing you need to do.
Note: Please don’t fill out the application on the SBA website and submit it to us, or send us any documents until we have contacted you.
How can I stay updated about future loan forgiveness changes?
Bookmark this page and check back frequently. We’re keeping a close eye on loan forgiveness developments as they come in from the SBA. We’ll continue to update this page to provide you with the most up-to-date information.
Last updated: October 28, 2020 - Simpler PPP forgiveness application for loans up to $50,000 available starting mid-November
Update on the PPP loan forgiveness application
As mentioned during our last update, the SBA and US Treasury released a new, simpler forgiveness application Form 3508S for PPP borrowers who have loans of up to $50,000.
We’re building our online version of this form and expect to begin rolling it out to eligible borrowers starting mid-November.
Keep reading to learn how to prepare for the application.
Who can use this simpler application form?
Only businesses that received PPP loans up to $50,000 can use this new Form 3508S.
If your loan is greater than $50,000—or if you and your affiliates received a total of $2 million or more in PPP funds—you aren’t eligible to apply using this simpler form. Instead, you’ll complete either Form 3508 or 3508EZ, which will be available at a later date.
What documents do I need to submit with this simpler forgiveness application?
You’ll need to submit documents showing:
1) Payroll expenses during the covered period (which can include third-party payroll service provider reports, bank statements, tax forms, payment receipts); and
2) Non-payroll expenses eligible for forgiveness (account statements from your lender/mortgage provider, landlord, and utility providers.)
Find more details below.
Employers
If you applied for your PPP loan with a Form 940, 941, 944, or W-2, please gather the following documents. Note that if you use Square Payroll as your payroll provider, we will automatically enter your payroll, wage, and employee compensation information—so you need not upload documents related to those expenses.
Payroll/Wages: taxable wage filings such as a Quarterly Form 941
Employee compensation: third-party payroll provider reports
Benefits: third-party payroll provider reports or benefit provider account statements
Utilities: utility account statements verifying payments for February 2020 and each month during your covered period
Rent: monthly landlord (lessor) account statements for February 2020 and each month during your covered period
Mortgage interest: lender account statements for February 2020 and each month during your covered period
Non-employers
If you applied for your PPP loan with a Form 1040 Schedule C, please gather these documents:
Payroll/Wages: 2019 Form 1040 Schedule C
Utilities: utility account statements verifying payments for February 2020 and each month during your covered period
Rent: monthly landlord (lessor) account statements for February 2020 and each month during your covered period
Mortgage interest: lender account statements for February 2020 and each month during your covered period
Note: You are not required to show the calculations used to determine your loan forgiveness amount. However, the SBA may request more information and documents while reviewing your application—and for up to six years after your loan is forgiven. Keep all of your documents just in case.
When do I need to complete and submit my forgiveness application?
You have up to 10 months after your covered period ends to apply for forgiveness.
When do I need to start repaying my loan?
You aren’t required to start making loan repayments until your forgiveness decision is determined. When repayment does begin, any loan amount that is not forgiven will need to be repaid, along with a low, 1% fixed annual interest rate on the amount not forgiven. You’ll repay through monthly payments automatically debited from your Square linked account.
Note: if you do not apply for forgiveness, your business will need to start repaying its loan within about 16 months of receiving the funds.
How will I know when the application has been released by Square Capital?
We will notify you by email and in the Square Dashboard when the application is ready. Until you hear from us, there’s nothing you need to do.
Note: Please don’t fill out the application on the SBA website and submit it to us, or send us any documents until we have contacted you.
How can I stay updated about future loan forgiveness changes?
Bookmark this page and check back frequently. We’re keeping a close eye on loan forgiveness developments as they come in from the SBA. We’ll continue to update this page to provide you with the most up-to-date information.
Last updated: October 12, 2020 - Simpler PPP Forgiveness for Loans of $50,000 or Less
The SBA and US Treasury released a new, simpler forgiveness application (Form 3508S) for PPP borrowers who have loans of $50,000 or less. This form is easier to fill out, and qualifying for forgiveness is also easier.
Find out more about the details of these changes, what it means for forgiveness, and how to prepare for the forgiveness application below.
How is this new forgiveness application simpler?
As long as you can attest that your business has abided by the rules of the Paycheck Protection Program, you can qualify for full forgiveness. There are fewer calculations you need to complete, and fewer documents you need to submit (although the SBA may request more information from you when reviewing your application and for up to six years after your loan is forgiven, so keep all of your documents just in case). Also, if your business reduced its number of full-time employees, salaries, or wages, you can still qualify for full forgiveness.
Who can use this simpler application form?
Only businesses who received PPP loans up to $50,000 can use this easier Form 3508S. If your loan is greater than $50,000, or if you and your affiliates received a total of $2 million or more in PPP funds, you aren’t eligible to apply using this simpler form. Instead, you’ll complete either Form 3508 or 3508EZ.
What documents do I need to submit with this easier forgiveness application?
You’ll need to submit documents showing 1) your payroll expenses during the covered period (which can include bank statements, tax forms, payment receipts), and 2) your non-payroll expenses eligible for forgiveness (business mortgage interest payments, rent or lease payments, and utility payments). You can find more information about the documents you’ll need in our forgiveness guide.
You are not required to show the calculations used to determine your loan forgiveness amount. However, the SBA may request more information and documents while reviewing your application and for up to six years after your loan is forgiven, so keep all of your documents just in case.
Are there any changes to forgiveness if I have an EIDL Advance?
No, there are no changes for EIDL Advances. Any EIDL Advance amount will still be subtracted by Square Capital (on behalf of the SBA) from your total forgiveness amount.
When will Square Capital’s PPP loan forgiveness application be ready?
As this new application (Form 3508S) was just released, we’re now creating an online form that’s easy for you to complete, as well as working with SBA to ensure we can seamlessly submit your application to them on your behalf. We’re also creating Form 3508 and 3508EZ for borrowers who aren’t eligible to apply using the easier form.
We will notify you by email and in the Square Dashboard when the application is ready. There’s nothing for you to do right now. Please don’t fill out the application on the SBA website and submit it to us, or send us any documents yet.
What can I do to prepare to apply for loan forgiveness?
Check out our forgiveness guide for details on expenses that are eligible for forgiveness, and the documents you can start to gather to help you prepare to apply for forgiveness.
How can I stay updated about future loan forgiveness changes?
Check back here frequently. We are keeping a close eye on loan forgiveness and will continue to update this page with new information.
Last updated: Sept 30, 2020- Potential forgiveness changes and their impact on loan forgiveness
We understand you may be anxious to apply for PPP loan forgiveness. We’re continuing to keep a close eye on updates from Congress—here’s the latest:
Congress is currently discussing a bill that can make it easier for you to apply and qualify for forgiveness. We’re waiting to hear more about this bill before releasing our forgiveness application.
Find out more about these potential changes, when you’ll need to start loan repayments, and how to prepare for the forgiveness application below.
When will Square Capital’s PPP loan forgiveness application be ready to complete?
Right now, Congress is considering a bill that will make loan forgiveness easier. Potential PPP changes may include:
Automatic forgiveness for businesses who received $150,000 or less in PPP funds who can attest they’ve made a best effort to comply with the program requirements
More ways to use your funds and qualify for forgiveness, including paying for operating costs, property damage, supplier costs, and worker protection expenses
We’re waiting to hear more about this bill before releasing our forgiveness application so you don’t potentially miss out on qualifying for more loan forgiveness.
We will notify you by email and in the Square Dashboard when the application is ready. There’s nothing for you to do right now. Please don’t fill out the application on the SBA website and submit it to us, or send us any documents yet.
Will waiting to apply hurt my ability to get loan forgiveness?
No, waiting will not affect your business’s ability to have your PPP loan forgiven.
You have up to 10 months after your covered period ends to apply for forgiveness. If you received your loan before June 5, 2020, you can select either an 8-week or 24-week covered period from the day you received your funds to spend it on qualified expenses. If you received your loan after June 5, 2020, you automatically have a 24-week covered period.
Waiting to see if Congress passes this bill is beneficial so you can qualify for the maximum forgiveness possible, which includes both eligible loan amount and any interest accrued on that amount.
When do I need to start repaying my loan?
You aren’t required to start making loan repayments until your forgiveness decision is determined, and you only need to repay the amount that is not forgiven. Also, if you do not apply for forgiveness, your business will need to start repaying its loan within about 16 months of receiving the funds. As of the date this article was published, you are not required to make any loan payments yet.
When repayment does begin, any loan amount that is not forgiven will need to be repaid, along with a low, 1% fixed annual interest rate on the amount not forgiven. You’ll repay through monthly payments automatically debited from your Square linked account.
Can I repay my loan before I apply for forgiveness?
Yes, you can make payments toward your loan at any time. Contact us and we‘ll help you set up your payment. However, as of date this article was published, you are not required to make any loan payments yet.
What can I do to prepare to apply for loan forgiveness
Check out our forgiveness guide for details on expenses that are eligible for forgiveness, and the documents you can start to gather to help you prepare to apply for forgiveness.
How can I stay updated on the latest developments in Congress and the forgiveness process?
Check back here frequently. We are keeping a close eye on loan forgiveness and will continue to update this page with new information.
Last updated: June 29, 2020- Commonly asked PPP loan forgiveness questions
We recently hosted a digital AMA (ask me anything) event where we fielded questions from businesses related to PPP loan forgiveness. We’ve shared below the most common questions asked by our sellers, as well as our responses, to help keep you up to speed with the latest information we have. You can also read through the entire list of questions and answers on the Square Seller Community.
Question: When will your PPP loan forgiveness application be ready for us to complete?
Answer: We’re working on an easy loan forgiveness application and will notify you by email and in the Square Dashboard when it’s ready. No action is needed from you right now for loan forgiveness. You don’t need to fill out the application on the SBA website and submit it to us, and you don’t have to send us any documents yet.
Question: I am an independent contractor who uses a single household checking account only. No payroll account or separate business account. How do I document that my PPP loan was used for ‘payroll’?
Answer: As an independent contractor, sole proprietor, or self-employed individual, if your covered period is eight weeks, you get eight weeks of your 2019 net profit (as reported on your Form 1040 Schedule C) forgiven, capped at $15,385 per individual. If your covered period is 24 weeks, you get 2.5 months of your 2019 net profit (as reported on your Form 1040 Schedule C) forgiven, capped at $20,833 per individual. This is called the Owner Compensation Replacement and was recently introduced by the SBA. To get your remaining PPP funds forgiven, you will need to spend it on business utilities, rent, and mortgage interest expenses (to the extent such expenses are deductible on your Form 1040 Schedule C). Telephone and internet bills are considered utilities costs. Other types of expenses appear to be ineligible for forgiveness at this time. Make sure to keep your documents showing your payments for these expenses during the covered period.
Question: I have a sole proprietorship and received the PPP. When I was offered the loan it gave me two amounts. One smaller and one bigger. I chose the smaller amount as it said it did not have to be repaid. Is this true?
Answer: If you chose the smaller amount, it is likely that most, if not all, of this amount will be eligible forgiveness when you apply.
For PPP forgiveness, “owner compensation replacement” counts as an eligible payroll cost, because - in effect - you are paying yourself by replacing the net profits that your business would otherwise have earned without the crisis. If you had the choice between two loan sizes and you chose the smaller one, then your loan size was equal to 8 weeks of your business’s 2019 net profits, which is the cap on owner compensation replacement. As a result, 100% of your loan proceeds will be considered a payroll cost and the entire loan amount should be eligible for forgiveness, regardless of what you spend the money on. Please note that you still need to submit a forgiveness application through Square Capital in order to get the loan forgiven, but we will know ahead of time that this was the case and set up your application appropriately. Watch out for an email and an update to your Square Dashboard for when the forgiveness application is ready.
Question: Do I have to use an official payroll system (like Quickbooks) to pay myself instead of transfers between my business and personal bank accounts (which is how I currently pay myself)?
Answer: You do not need an official payroll system to be eligible for forgiveness. If you are an independent contractor, sole proprietor, or self-employed, you do not need to show transfers between your business and personal bank accounts for your payroll costs to be eligible for forgiveness. For PPP forgiveness, “owner compensation replacement” counts as an eligible payroll cost, because - in effect - you are paying yourself by replacing the net profits that your business would otherwise have earned without the crisis.
If you choose the 8-week covered period, then your “owner compensation replacement” will equal 8 weeks worth (8/52) of your 2019 net profit, capped at $15,385. If you choose the 24-week covered period (or received your loan after June 5, 2020), then your “owner compensation replacement” will equal 2.5 months worth (2.5/12) of your 2019 net profit, capped at $20,833. You do not need to show documentation of how you spent these funds, just that you had this net profit in 2019 (e.g., with a 2019 Form 1040 Schedule C).
If your loan proceeds exceed the above amounts for “owner compensation replacement”, you will need to show documentation that the excess was spent on eligible non-payroll costs (business mortgage interest, business utilities, business rent) in order for it to be eligible for forgiveness. Such non-payroll costs must be deductible on your Form 1040 Schedule C.
Question: Where do I submit documentation for PPP forgiveness and what documents are required?
Answer: Square Capital is working on an easy way to upload documents and calculate how much of your loan is eligible for forgiveness. We will notify you as soon as it is ready through email and your Square Dashboard in the next few weeks. In the meantime, no action is needed from you right now for loan forgiveness. You don’t need to fill out the application on the SBA website and submit it to us, and you don’t have to send us any documents. You can start collecting documents you’ll need to apply for forgiveness. These documents may include:
Documents and receipts that prove how you spent the funds such as:
Payroll costs:
Bank account statements or third-party payroll service provider reports.
Tax forms such as IRS payroll tax filings and state quarterly business and employee wage reporting and unemployment insurance tax filings.
Payment receipts, cancelled checks, or account statements documenting employer contributions to employee health insurance and retirement plans.
Non-payroll Costs:
receipts, cancelled checks, or account statements for all categories, and additionally:
Business Mortgage: lender amortization schedule
Business rent/lease: current lease agreement
Business utility: invoices from February 2020 and covered period.
Full-time equivalent (“FTE”) Documentation showing average employees during your chosen reference period (or between January 1, 2020 and the end of your Covered Period) such as payroll tax filings (e.g. Form 941), state quarterly business and individual employee wage reporting and unemployment insurance tax filings.
Question: Is it true that the timeline has been changed from 8 weeks to 24 weeks to use the PPP money?
Answer: Yes. If you received your loan before June 5, 2020, you can now elect between a covered period of 8 weeks or 24 weeks from the day you received your funds to spend on expenses eligible for forgiveness. If you received your loan after June 5, 2020, you have 24 weeks to spend your funds on expenses eligible for forgiveness.
You also have until the earlier of December 31, 2020 or the date your loan forgiveness application is submitted to rehire staff and return wages to 75% of pre-crisis levels to maximize your forgiveness amount. You can also spend up to 40% of your loan on eligible non-payroll costs, up from 25% previously, and still have the full loan forgiven. The updates to the safe harbor deadline and the non-payroll cost percentage apply to all PPP loans, including those issued before the new rules went into effect.
Question: Why is the EIDL grant being deducted from the forgiveness amount on the PPP loan?
Answer: If you received both an EIDL advance and a PPP loan, the CARES Act specifies that the EIDL advance will be deducted from your PPP loan forgiveness amount. For example, if you receive a $5,000 EIDL advance and a $15,000 PPP loan, only $10,000 of your PPP loan is eligible for forgiveness. Your EIDL advance does not need to be repaid.
Question: I just received PUA unemployment and I also got the PPP loan. Was that ok and is my loan still forgivable?
Answer: You’re able to apply for either the PPP or unemployment, but you cannot have both. If you choose to keep your PPP loan, you must withdraw from receiving unemployment benefits.
Question: Can 100% of the loan be used to pay for payroll? What is the maximum that can be used toward payroll?
Answer: Yes, you can use 100% of your PPP loan for payroll costs and have the loan be fully forgiven. A minimum of 60% of your loan amount must go to payroll costs in order to qualify for full forgiveness.
Question: Does PPP forgiveness apply to new employees?
Answer: Yes. If you have reduced your headcount, you can either rehire the same employees or hire new employees to get back to pre-crisis staffing levels to be eligible for full forgiveness. You will need to get back to the same pre-crisis headcount levels by the earlier of December 31, 2020 or the date your loan forgiveness application is submitted to be eligible for full forgiveness.
Question: Will Square help with needed proof of PPP if we use Square for Payroll?
Answer: Yes, we plan to generate a PPP Forgiveness Report that details eligible payroll costs over the chosen loan forgiveness period. We also plan to help calculate your Full-Time Equivalency (FTE) and Salary/Hourly Wage Reductions. Note this functionality may not be immediately available when the Square forgiveness application first becomes available. This will be in addition to the tax filings we complete on your behalf and other custom reports we provide.
Question: What is the PPP lender loan number? I don’t see it anywhere and it was one of the questions on the SBA’s forgiveness form. Where can I find this information?
Answer: We will automatically include the PPP lender number in your forgiveness application when it’s available for you to fill out. We’re working on an easy loan forgiveness application and will notify you by email and in the Square Dashboard when it’s ready in the next few weeks. No action is needed from you right now for loan forgiveness. You don’t need to fill out the application on the SBA website and submit it to us, and you don’t have to send us any documents yet.
The Flexibility Act: Key changes in forgiveness
Last updated: 6/8/20- Quick recap of the Flexibility Act, and what it means for you.
On June 3, Congress passed the PPP Flexibility Act of 2020 (the “Flexibility Act”), which offers businesses more flexibility in qualifying for forgiveness of their PPP loans.
Your PPP forgiveness amount depends on how much of the loan was spent on four categories of eligible expenses: payroll costs, business rent, business utilities, and business mortgage interest. This new law makes a few important changes to forgiveness. We’ve highlighted a few below, but you can always check out the SBA's PPP website for the latest updates.
More time to spend on eligible expenses: Businesses now have up to 24 weeks (up from the previous 8 weeks) from the day they received to spend the funds on expenses eligible for forgiveness. The final date you can spend your funds and still be eligible for forgiveness is December 31, 2020.
More time to rehire employees or to restore their wage levels: Your forgiveness amount may be affected if you had to cut wages by more than 25% or let go of your staff. The new rules give businesses until December 31, 2020, to rehire staff and return wages to 75% of pre-crisis levels to maximize their Forgiveness Amount, which is an extension of the original June 30 deadline.
More spending flexibility: Businesses can now spend up to 40% (up from 25%) on eligible non-payroll expenses (rent, utilities, or mortgage interest for your business), and have these amounts forgiven.
A different time horizon before payments are due: Under the new rules of the Flexibility Act, businesses aren’t required to start making payments until their forgiveness decision is determined. Additionally, businesses must begin making payments if they do not apply for forgiveness within about 16 months of receiving the funds. (Before this new Act was passed, forgiveness included a six-month repayment holiday for everyone, where payments were not due for six months.) Heads-up: This means that if you do not receive full forgiveness of your PPP loan, your payments will become due shortly after receiving your forgiveness decision, which could be earlier than 6 months, depending on when you submit your forgiveness application.
What this means for you: If you already have a PPP loan
Hopefully, these rules offer more flexibility in spending your PPP funds on what’s right for you and your business. Because you’re only able to apply for forgiveness once, and your repayment obligations begin when you receive the forgiveness decision, you may want to wait to apply until the end of the 24-week period after you received the loan or you have reached the maximum amount that can be forgiven. For example, if you plan on spending the proceeds on payroll within the year, you may want to wait to apply until your eligible payroll costs meet your loan amount.
If you received your PPP loan through Square Capital, we’re working on an application that makes it easy for you to apply for loan forgiveness. After you submit the application, we’ll modify your loan balance automatically. You’ll be notified by email and your Square Dashboard with the forgiveness application when it is ready.
In the meantime, please track your expenses carefully, paying special attention to the documents listed on page 10 of the SBA Form. You don’t need to send us a completed hard copy of the SBA’s PDF form or documents right now.
What this means for you: If you haven’t applied yet
Is a PPP loan now the right fit for your business? You can still apply with a PPP lender. Legally, the last day the SBA will approve PPP applications is June 30. However, because time is needed to review applications before making a decision, most lenders will likely stop taking applications before June 30.
Applications through Square Capital must be fully submitted by the evening of June 23. Eligible customers can find the application on the Capital section of their Square Dashboard. Check out our PPP FAQ to learn what you need to apply.