Do you have questions about the Second Round of PPP Loan Forgiveness?

Paycheck Protection Program PPP Loan forgiveness application form.

Did you receive a PPP Loan during the second round of disbursements? Are you not sure how PPP Round 2 differs from Round 1? Here are EPGD Business Law’s answers to your questions regarding the second round of PPP loan forgiveness.

What were the terms of the second PPP loan?

Borrowers were permitted to receive a maximum loan amount of $2 million. Loan amounts could have been up to 2.5 times the average of the borrower’s monthly 2019 or 2020 payroll costs.

The new round of PPP funding was available to new and repeat borrowers alike, considering they met certain criteria. For repeat borrowers, requirements included that (1) they received the first round of PPP loans and have used or will eventually use the full amount given, (2) the business has no more than 300 employees, and (3) the business can demonstrate that gross receipts between any fiscal quarter in 2019 and 2020 were reduced by 25%. This second round of PPP loans was also expanded to specified businesses and companies that were ineligible the first round.

Is the second PPP loan forgivable? If so, what are the terms?

Yes! Borrowers of the second round of PPP loans are eligible for forgiveness equal to the sum of payroll costs, covered mortgage, rent, utility payments, covered operations expenditures, covered property damage costs, covered supplier costs, and covered worker protection expenditures incurred during the 8-to-24-week covered period. To qualify for the full loan forgiveness, at least 60% of the proceeds must have been spent on payroll costs; the remaining 40% could have been applied to non-payroll costs. Additionally, employee and compensation levels must have been maintained at the same level as specified for the first round.  

What expenses qualify for PPP forgiveness Round 2?

As mentioned previously, the PPP Round 2 covers expenses related to payroll, mortgages, and utilities. This round of PPP loans also includes a new list of forgivable expenses that include business software, costs associated with vandalism damages, and costs related to safety compliance with COVID-19 protocols.

When can I apply for PPP Round 2 forgiveness?

Small business owners may apply for loan forgiveness once they have used all their loans for which they are requesting forgiveness. Borrowers may apply for loan forgiveness any time up to the maturity date of the loan. However, if a borrower fails to apply for forgiveness within 10 months after the last day of the respective 8-to-24-week covered period, they will need to make loan payments to their PPP lender since the payments are no longer deferred. 

Which PPP loan forgiveness application should I use?

Three application forms are available to borrowers seeking loan forgiveness: SBA Forms 3508EZ, 3508S, and 3508. Each form has certain requirements. Please note that a borrower may not use one form to apply for loan forgiveness for both first and second round loans. Borrowers who received both a second round PPP loan greater than $150,000 and a first round PPP loan must first submit their applications for the first round’s loan forgiveness before or simultaneously as their second round’s application. 

Form 3508EZ: The 3508EZ is a simplified form application available to borrowers who received a loan more than $150,000 and meet one of the following criteria:

  • The borrower did not reduce annual salary or hourly wages of any employee by more than 25% during the covered period compared to the most recent full quarter prior to the covered period and did not reduce the number of employees or average paid hours between January 1, 2020, and the end of the covered period; or 
  • The borrower did not reduce annual salary or hourly wages of any employee by more than 25% during the covered period compared to the most recent full quarter prior to the covered period and was unable to operate during the covered period at the same business activity level as before February 15,2020, due to health directives related to COVID-19. 

Form 3508S: During the first round of loan forgiveness, loans under $50,000 qualified for Form 3508S. However, the Small Business Administration (SBA) has changed the requirement so that this form can be used for loans $150,000 or less. On the Form 3508S, calculations are not required to determine the borrower’s loan forgiveness amount. Nonetheless, the SBA may request calculations during a loan or audit review. 

Form 3508: If a borrower does not meet any of the requirements for the previous applications, then they must use the standard Form 3508.

What are the steps to apply for the second round of PPP loan forgiveness?

Step 1: Get into contact with your PPP lender. Make sure to complete the correct form, whether it is the SBA Form 3508, SBA Form 3508EZ, SBA Form 3508S, or a lender equivalent.

Step 2: Put together your documentation regarding payroll and non-payroll costs. Payroll cost documentation includes bank statements for employee compensation, tax forms, and receipts and account statements regarding loan-based employer contributions to employee retirement plans and health insurance. Non-payroll documentation refers to receipts or account statements of mortgage payments, rent or lease expenses, and utility bills. Because this is not an exhaustive list of all the documentation needed for the application, please see this website or the actual loan forgiveness applications found here for a comprehensive list. 

Step 3: Submit the loan forgiveness application form and supporting documentation to your PPP lender. Make sure to consistently communicate with your lender to make sure all documentation has been received and any additional requirements have been met. Eventually, your lender will reach out to you regarding any loan reviews, the forgiveness amount paid by the Small Business Administration, and the date of your first loan payment (if applicable). 

Remember that each lender may have different requirements, so make sure you reach out to your lender for steps on applying for PPP loan forgiveness. 

Can I still request a PPP loan?

Unfortunately, the PPP loan program ran out of funds on May 5, 2021. If funds had not run out, the last day to have applied for PPP loans was May 31, 2021. 

Are there tax implications on the PPP loan forgiveness?

Under the Consolidated Appropriations Act 2021, forgiven round one and round two PPP loan debt is not taxable. Additionally, the Act allows that “ordinary and necessary” expenses paid with forgiven PPP loans are deductible.

EPGD Business Law is located in beautiful Coral Gables, West Palm Beach and historic Washington D.C. Call us at (786) 837-6787, or contact us through the website to schedule a consultation.

*Disclaimer: this blog post is not intended to be legal advice. We highly recommend speaking to an attorney if you have any legal concerns. Contacting us through our website does not establish an attorney-client relationship.*

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Eric Gros-Dubois

Eric P. Gros-Dubois founded EPGD Business Law in 2013 and is the current head of the firm’s corporate, estate planning, and tax practice, and manages the firm’s Washington D.C. office. With a JD and MBA, and a specialization in finance, Eric is able to step back and view the legal world through a commercial lens while also acting as a trusted business advisor for his clients. He does his best to be solutions oriented, and tries to think like a business owner, not just a lawyer.


*The following comments are not intended to be treated as legal advice. The answer to your question is limited to the basic facts presented. Additional details may heavily alter our assessment and change the answer provided. For a more thorough review of your question please contact our office for a consultation.

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