Do I Have To Pay Back My PPP Loan?

The COVID-19 pandemic was a great hardship on many business owners, putting many of them on the brink of failure. To stay solvent and keep employees working during the pandemic, the federal government introduced the Paycheck Protection Program (PPP) to provide relief.

This program fell under the control of the U.S. Small Business Administration (SBA), and third-party lenders originated the loans. The maximum amount that business owners could borrow was $10 million, which was determined by analyzing the business’s payroll records.

The loan terms were set at a 1% interest rate accrued over two or five years and could be partially or entirely forgiven under certain conditions. For those who chose the two-year term, it’s time to file for forgiveness or begin repayment of your PPP loan. Here’s how to know if you qualify for loan forgiveness and the instructions to either begin the application process or repay what you owe.

Terms for Loan Forgiveness


Office desk table with calculator and notebook with PPP Loan text by Marco Verch Professional Photographer is licensed with CC BY 2.0

The SBA mandated that those who borrowed a PPP loan would be eligible to have part or all of their loan forgiven if they used it for qualifying purposes. These purposes include payroll costs, as well as rent, utilities, or business mortgage interest payments within either the eight-week or 24-week period after the SBA dispersed the funds.

If an employer has rehired or kept employees while maintaining pre-pandemic salary levels, the U.S. Chamber of Commerce has deemed them eligible for forgiveness. If an employer meets some, but not all, of the requirements, they can still qualify for partial forgiveness of their PPP loan.

Here are the SBA’s requirements of eligibility for full PPP loan forgiveness: 

  • A minimum of 60% of the PPP Loan funds must cover payroll.
  • The other remaining funds must be used on qualifying expenses such as utility costs, rent obligations, mortgage interest, property damage (including uninsured destruction from acts of civil unrest), operations costs (including business and accounting software), worker protection expenditures (such as sneeze-guards and personal protective equipment), and supplier costs for essential goods.
  • Business owners must make a good faith attempt to maintain both employee salaries and the level of employment they had prior to the pandemic.

According to the SBA, once a borrower has spent all the funds received from their PPP loan, they can initiate the loan forgiveness application process. They can apply until the loan’s maturity date or within 10 months after the last day of the covered period. After that, borrowers will need to begin making payments. 

PPP Loan Forgiveness Application

If you determined that you qualify for forgiveness and are within your application period, you first want to go to to see if your lender is doing direct forgiveness through the SBA. If so, you’ll need to fill out the correct documentation. If your lender participates in direct forgiveness, apply through the online portal. This portal will ask questions that will complete SBA Form 3508S.

If your lender isn’t participating in direct forgiveness through the SBA, then you have to file the application with your lender, who will guide you through the process of filling out SBA Form 3508, 3508EZ, 3508S, or any equivalent your lender offers. Next up, you’ll need to get together supporting documents. Form 3508S doesn’t have any additional documentation requirements, but your lender may ask for information about those calculations during the audit or loan review process.

To complete the process, the SBA will require you to share a variety of documents. First, you’ll need to provide documentation for all payroll periods within or overlapping the covered timeframe. This includes information, such as bank statements, that show the company’s payroll. If you use a third-party service, request a report from them that documents your organization’s payroll.

The SBA will ask you to provide tax forms associated with the payroll from within the covered period, as well as canceled checks, payment receipts, and account statements that show payments made to employee retirement plans or health insurance. In addition, you’ll have to show supporting documentation for any applicable non-payroll qualifying expenses during the covered period.

If a review of your loan is required, either the SBA or your lender will notify you about the review and decision once it’s been made. If you disagree with their findings, you can appeal certain SBA loan review decisions. Once the SBA completes its review, your lender must let you know the amount of the loan that was forgiven and when your first payment is due for partial forgiveness.

Loan Repayment Details

If you have complete forgiveness of your PPP loan, there will be no payments due. However, if it was a partial forgiveness or the application was denied, you need to start submitting payment and pay it off before its maturity date. In the time between the disbursement of the funds and the determination of the forgiveness amount by the SBA, interest began to accrue. Whatever amount is left over, if any, after you’ve completed the loan forgiveness process will be subject to this accrued interest.

Once the loan term has elapsed, the borrower will have 10 months to apply for PPP loan forgiveness. Upon completion of the application, the lender gets 60 days to submit it to the SBA. The SBA has 90 days to decide. Upon a final decision by the SBA, your lender will calculate the remaining amount that you owe on your PPP loan and give you a statement that delineates the payments and amounts due.

For loans approved before June 5, 2020, the borrower will have two years to repay what they owe, while loans approved after that date will need to be repaid within five years. Regardless of your circumstances, you can always repay early without additional fees or penalties.

For tax preparation services, business consulting services, and financial planning, contact the knowledgeable team at Pasquesi Sheppard LLC. You can reach us at 847-234-5000 or complete our secure online form to get started. We provide high-quality accounting and business services to the Lake Forest and Chicago area.