Paycheck Protection Program - Loan Forgiveness Best Practices

Posted on April 29, 2020

Mask with man blurred in background on laptop

Congratulations on receiving your loan funds from the Paycheck Protection Program (PPP). Peoples Bank of Alabama is proud to have helped provide paychecks for more than 1,800 businesses in our communities. Thank you for allowing us the opportunity to be your PPP resource.

So, now what? The SBA outlined how you can spend this money and more importantly, how you can avoid having to repay this loan in the future. Loan payments are required beginning 10 months after the end of the covered period and we want you to have submitted your forgiveness request before then.

The SBA has released a new forgiveness application, the 3508s (where “s” stands for “short”) for loans $150,000 and less. You will not have to submit any supporting documents to justify your use of loan proceeds. We have provided in this blog some “BEST PRACTICE” suggestions we received from CPAs and attorneys that may make complying with these rules easier.


  • Payroll costs for employees (limited to the first $100,000). Remember at least 60% of loan must be spent on payroll costs.
  • The remainder 40% can be spent on:
    • Paid time off and leave for employees*
    • Pension and retirement plans
    • Federal income and FICA taxes
    • State unemployment insurance
    • Utilities
    • Rent
    • Interest on mortgage payments
    • Business software or cloud services that facilitate business operations**
    • Costs related to property damage, vandalism or looting due to unrest that occurred in 2020
    • Supplier costs that are essential to the operations of the business
    • PPE that help businesses comply with federal and state COVID-19 safety guidelines (like face masks)
    • Measures that help businesses comply with federal and state COVID-19 safety guidelines (like plastic separators)

*Keep in mind that if you use FFCRA tax credits to cover these, then they will not be considered eligible expenses.

**These include software or cloud services that facilitate product or service delivery, processing payments, tracking of payroll expenses, human resources, sales and billing functions, accounting, tracking supplies and/or inventory, tracking records and/or expenses.

  • In order to qualify for forgiveness, you must keep records and documentation (including purchase orders and invoices) for these expenses; however, loans $150,000 and less do not require the submission of documentation for the use of loan funds.
  • Unless provided at the time of application, the borrower MUST provide evidence of 25% revenue reduction from 2019 to 2020 (either same quarter-to-quarter comparison or yearend-to-yearend).

Kevin Kilpatrick

Kevin Kilpatrick

Kevin Kilpatrick is Senior Vice President of GCap Financing, a division of Peoples Bank of Alabama. Kevin has 33 years of banking experience which has taught him that borrowers need more than a good idea to be successful. The most successful business leaders surround themselves with the best team of advisors they can find. Kevin’s knowledge of SBA, USDA and other loan products qualifies him to be a valuable advisor to his customers for financing requests between $50,000 to $10,000,000 for the purchase of real estate, equipment, business acquisition, startup and franchises, refinancing existing debt and to provide working capital. Kevin may be reached by filling out this contact form.