Paycheck Protection Program Loan Forgiveness
Important Notice (1/21/2021) – Revised Forgiveness Forms Available
New Congressional legislation includes a number of changes to PPP loan forgiveness that benefit small businesses. Revised PPP loan forgivness forms are now available from the links on this page. Royal is waiting for additional information from the SBA to prepare and open our PPP loan forgiveness application for new PPP borrowers. We will continue to update the information on this page as the SBA provides more guidance. We will also provide email updates to our current PPP borrowers.
Here is a brief overview of the expected changes that affect PPP loan forgiveness for some borrowers:
- There will be a one page streamlined forgiveness application for loans of $150,000 or less.
- SBA’s requirement to deduct the EIDL Advance from your loan forgiveness amount will be eliminated.
- Eligible covered expenses will be expanded to include new expense categories.
PPP Loan Forgiveness Summary
Please note: the information below will be changing as new information is released by the SBA.
- PPP loans may be partially or completely forgiven if you meet certain Small Business Administration conditions.
- If you received your PPP loan through Royal, you will need to apply for forgiveness with Royal.
- Royal will follow SBA guidance available at the time of submission to determine the forgivable amount.
Preparing To Apply?
Please follow the steps below to help prepare for your online forgiveness application with Royal Credit Union.
Step 1: Choose the forgiveness form that applies to your business.
- There were formerly three versions of the PPP Loan Forgiveness Applications and Instructions. We've included basic info about each form below, along with links to the forms and instructions for your reference. For more details about who can use which form, see our guide to choosing a PPP forgiveness form.
- "S" Form: The "S" form is the simplest forgiveness form with the fewest calculations and least amount of documentation. Almost anyone with a total PPP loan amount of $150,000 or less can use the "S" form.
- "EZ" Form: If you don't qualify to use the "S" form, you may be able to use the "EZ" form, which is another simplified form with fewer calculations than the "full" form.
- "Full" Form: If you don't qualify to use the "S" or "EZ" forms, you'll need to use the "full" form. This form requires more calculations and documentation, but it can be used for all PPP situations.
- Royal will accept applications only through our online process. By completing a “draft” in advance, you will be prepared to transfer that information to our online forgiveness forms. This will help maximize your loan forgiveness amount and help ensure timely review by Royal and the SBA.
- Review the form instructions to determine what documentation you will need to submit. Documentation will need to be submitted for EACH item in the Payroll and Non-Payroll categories for ONLY the items that you are requesting forgiveness for. If you choose the full form 3508, FTE documentation is also required. For more details about what documentation is needed, see our guide to PPP forgiveness documentation or the checklist included with our PDF PPP Loan Forgiveness Guide.
Step 2: Determine your covered period, gather the documentation that you will be required to submit, and complete a "draft" of the Forgiveness Application.
- If you have the option to use an 8-week or 24-week Covered Period, we recommend using the 24-week Covered Period because it is often easier to document. This will allow ample time to use funds for eligible costs. It may also reduce the amount of documentation that you need to gather and submit. For example, if you have enough payroll costs to cover the full amount of loan forgiveness, you wouldn't need to provide non-payroll documentation. A detailed explanation of Covered Periods is included in our FAQ section below.
- Thanks to new legislation, the Covered Period begins on the date your loan originated and ends on the date of your choosing that is between 8 and 24 weeks after origination.
- We will not be accepting applications that are not submitted through our online application process.
- Royal Credit Union is not able to complete or prepare your loan forgiveness application.
- Consult with your accountant, payroll provider, and/or other professional to assist in preparing your loan forgiveness application.
Step 3: Do you have additional questions about the PPP loan forgiveness application process? You’re not alone.
- SBA is hosting informational webinars frequently. Find available PPP forgiveness webinars on the SBA’s Event Calendar by searching “PPP” or “Forgiveness”.
- Review the SBA’s Paycheck Protection Program webpage or US Treasury CARES website for additional program information and Frequently Asked Questions on PPP Loan Forgiveness.
What To Expect During The Forgiveness Process
Here is an overview of what to expect during our PPP loan forgiveness process. We will provide updates throughout the process by email.
- If you have a PPP loan with Royal Credit Union, you will receive an email notification that our online forgiveness application is available.
- You will request access to Royal’s forgiveness application using the “apply for forgiveness” link below.
- We will verify your SBA loan number to confirm that you are eligible to begin a forgiveness application with Royal.
- Once your eligibility is confirmed, we will email you links to our online forgiveness forms.
- You will fill in the required information and upload all necessary documents to complete our online application.
- We review your application and contact you if any revisions need to be made or any documents are missing. This process may take up to 60 days after we receive your completed application, although we are doing everything we can to process applications as efficiently and accurately as possible.
- Once your application is complete, we will submit it to the SBA. The SBA may take up to 90 days to review your application.
- Once the SBA communicates their decision for your application to Royal, we will contact you within 5 business days with next steps depending on if your loan was fully forgiven, partially forgiven, or denied.
Paycheck Protection Program Loan Forgiveness FAQs
While many borrowers are anxious to apply for PPP loan forgiveness, Royal is waiting for additional guidance from the SBA before opening our PPP loan forgiveness application.
Most borrowers have time to wait. Carefully consider if taking longer to accumulate eligible forgiveness expenses would increase the portion of your loan that is forgivable. You can accumulate eligible expenses over a full 24-week Covered Period. You also have 10 months after your 24-week covered period before payments begin, as long as you have not yet applied for forgiveness. Remember that you can apply for forgiveness at any time. You can apply for forgiveness during repayment or any time before maturity.
For best results with Royal Credit Union's online PPP Loan Forgiveness application forms, we recommend using one of the following supported browsers:
- Microsoft Internet Explorer 11
- Microsoft Edge (EdgeHTML 16 or newer)
- Google Chrome 64 or newer
- Mozilla Firefox 59 or newer
- Apple Safari 10.1/11.0/11.1 or newer
For example, if you have trouble uploading documents using an older browser, or an unsupported browser, you may need to switch to one of the supported browser versions listed above.
- The Covered Period or Loan Forgiveness Period is the period during which expenses count toward loan forgiveness. New changes in 2021 mean the Covered Period begins on the date of loan origination and ends on a date of your choosing that is between 8 and 24 weeks after origination.
Alternative Payroll Covered Period
- We are waiting for additional SBA guidance to determine if the Alternative Payroll Covered Period continues to be available for borrowers in 2021.
Due to new legislation that made a number of changes to PPP loan forgiveness, Royal is waiting for guidance from the SBA before opening our forgiveness process.
Please keep in mind that you have ample time to apply for loan forgiveness. If you don’t apply for forgiveness within 10 months after the last day of your covered period, you loan payments will begin. For example, if your covered period ends on October 30, 2020, you have until August 30, 2021 to apply for forgiveness before loan payments begin.
You will receive an email from Royal when our online Loan Forgiveness Application is available for you to apply. Due to the volume of PPP loans that Royal processed, we will be sending email invitations out to borrowers based on loan funding dates.
No, Royal will not accept paper or e-mailed applications. Borrowers must submit their application through our easy-to-use online application process.
Royal has 60 days from the receipt of a completed forgiveness application to review and submit to the SBA. The SBA has 90 days from the receipt of that application to review and confirm the forgiveness amount.
For any balance that does not qualify for forgiveness, you will need to start making principal and interest payments based on the loan terms disclosed in your original loan note or note modification with Royal.
The previous requirement to deduct EIDL advance amounts from PPP loan forgiveness amounts has been removed.
Note: An EIDL Advance is not the same as the Economic Injury Disaster Loan. An Economic Injury Disaster Advance was a direct payment of $1,000-$10,000 provided by the SBA based upon the number of FTE’s. The business would have been paid $1,000 per FTE, at a max of 10.
For self-employed and independent contractors, the maximum owner compensation allowed for loan forgiveness is $20,833 for a 24-week covered period or $15,385 for an 8-week covered period (if elected).
The compensation of self-employed Schedule C (or Schedule F) individuals, including sole proprietors, self-employed individuals, and independent contractors, that is eligible for loan forgiveness is limited to 2.5/12 of 2019 net profit as reported on IRS Form 1040 Schedule C line 31 (or 2.5/12 of 2019 net farm profit, as reported on IRS Form 1040 Schedule F line 34) (or for new businesses, the estimated 2020 Schedule C (or Schedule F) referenced in question 10 of “Paycheck Protection Program: How to Calculate Maximum Loan Amounts – By Business Type”4 ). Separate payments for health insurance, retirement, or state or local taxes are NOT eligible for additional loan forgiveness; health insurance and retirement expenses are paid out of their net self-employment income. If the borrower did not submit its 2019 IRS Form 1040 Schedule C (or F) to the Lender when the borrower initially applied for the loan, it must be included with the borrower’s forgiveness application.
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. In addition to the specific caps described below, the amount of loan forgiveness requested for owner-employees and self-employed individuals’ payroll compensation is capped at $20,833 per individual 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. 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. The examples below are for a borrower using a 24-week Covered Period.
C Corporations: The employee cash compensation of a C-corporation owner-employee, defined as an owner who is also an employee (including where the owner is the only employee), is eligible for loan forgiveness up to the amount of 2.5/12 of his or her 2019 employee cash compensation, with cash compensation defined as it is for all other employees. Borrowers are also eligible for loan forgiveness for payments for employer state and local taxes paid by the borrowers and assessed on their compensation, for the amount paid by the borrower for employer contributions for their employee health insurance, and for employer retirement contributions to their employee retirement plans capped at the amount of 2.5/12 of the 2019 employer retirement contribution. Payments other than for cash compensation should be included on lines 6-8 of PPP Schedule A of the loan forgiveness application (SBA Form 3508 or lender equivalent), for borrowers using that form, and do not count toward the $20,833 cap per individual.
S Corporations: The employee cash compensation of an S-corporation owner-employee, defined as an owner who is also an employee, is eligible for loan forgiveness up to the amount of 2.5/12 of their 2019 employee cash compensation, with cash compensation defined as it is for all other employees. Borrowers are also eligible for loan forgiveness for payments for employer state and local taxes paid by the borrowers and assessed on their compensation, and for employer retirement contributions to their employee retirement plans capped at the amount of 2.5/12 of their 2019 employer retirement contribution. Employer contributions for health insurance are not eligible for additional forgiveness for S-corporation employees with at least a 2% stake in the business, including for employees who are family members of an at least 2% owner under the family attribution rules of 26 U.S.C. 318, because those contributions are included in cash compensation. The eligible non-cash compensation payments should be included on lines 7 and 8 of PPP Schedule A of the Loan Forgiveness Application (SBA Form 3508), for borrowers using that form, and do not count toward the $20,833 cap per individual.
Self-employed Schedule C (or Schedule F) filers: The compensation of self-employed Schedule C (or Schedule F) individuals, including sole proprietors, self-employed individuals, and independent contractors, that is eligible for loan forgiveness is limited to 2.5/12 of 2019 net profit as reported on IRS Form 1040 Schedule C line 31 (or 2.5/12 of 2019 net farm profit, as reported on IRS Form 1040 Schedule F line 34) (or for new businesses, the estimated 2020 Schedule C (or Schedule F) referenced in question 10 of “Paycheck Protection Program: How to Calculate Maximum Loan Amounts – By Business Type”4). Separate payments for health insurance, retirement, or state or local taxes are not eligible for additional loan forgiveness; health insurance and retirement expenses are paid out of their net self-employment income. If the borrower did not submit its 2019 IRS Form 1040 Schedule C (or F) to the Lender when the borrower initially applied for the loan, it must be included with the borrower’s forgiveness application.
General Partners: The compensation of general partners that is eligible for loan forgiveness is limited to 2.5/12 of their 2019 net earnings from self-employment that is subject to self-employment tax, which is computed from 2019 IRS Form 1065 Schedule K-1 box 14a (reduced by box 12 section 179 expense deduction, unreimbursed partnership expenses deducted on their IRS Form 1040 Schedule SE, and depletion claimed on oil and gas properties) multiplied by 0.9235.5 Compensation is only eligible for loan forgiveness if the payments to partners are made during the Covered Period or Alternative Payroll Covered Period. Separate payments for health insurance, retirement, or state or local taxes are not eligible for additional loan forgiveness. If the partnership did not submit its 2019 IRS Form 1065 K-1s when initially applying for the loan, it must be included with the partnership’s forgiveness application.
LLC owners: LLC owners must follow the instructions that apply to how their business was organized for tax filing purposes for tax year 2019, or if a new business, the expected tax filing situation for 2020.
- The content above is intended to be a general summary of provisions based on available SBA guidance. All information is subject to additional regulation and/or changes provided by the U.S. Small Business Administration (SBA) and the U.S. Department of the Treasury. For current guidance or additional information, please visit the SBA website, the U.S. Treasury CARES website, the U.S. Chamber of Commerce Combatting the Coronavirus website, or the other resource on our Emergency Relief Resources For Business Members page.