New Paycheck Protection Program Loan Forgiveness and Repayment Rules

Paycheck Protection Program funds distributed in early 2020 helped small employers across America make payroll and meet other businesses expenses during the pandemic and economic shut-down. If the small business borrower meets certain requirements, the loan can convert into a grant that is fully forgiven.

Since March, the rules have changed several times in favor of business owners by simplifying the process for obtaining forgiveness. Here are details to know as of November 2020.

See if you pre-qualify!

Paycheck Protection Program fund changes

Here are the changes enacted to ease the paperwork requirements and expand the use of proceeds restrictions:

  • The initial requirement of spending 75% of PPP funds for payroll and 25% for other expenses was adjusted to 60% and 40% respectively.
  • The window to spend these funds expanded from 8 weeks to 24.
  • Unless forgiven, the PPP loan amortization now begins 10 months after the initial 24-weeks – basically 16 months after the date on your loan document.
  • Also new is an option to ask your banker for a payback period of up to five years for unforgiven funds. The interest rate is still 1%.

Updated forgiveness news

The PPP forgiveness intention hasn’t changed, but pay attention to these process edits:

  • The forgiveness grace period is now the same 16 months
  • Lenders have 60 days to review your forgiveness documents

The SBA has 90 days to review your forgiveness documents.

New form requirements

The original 11-page PPP forgiveness form, was replaced with two newer forms in June, and just now a brand new one. You can typically find these forms on your bank’s website or

  • The 3508 EZ Loan Forgiveness Application Form is less than three pages and is for PPP borrowers who DID NOT reduce employee compensation or hours during the 24 weeks.
  • Form 3508 is for those who DID change those two payroll parameters.
  • Form 3508-S is new - one and a half pages - for businesses seeking PPP forgiveness for amounts less than $50,000, which covers most PPP loans.

For eligible borrowers, your full forgiveness number will not exceed your PPP loan amount. So, if you received an EIDL grant (not the loan) based on $1,000 per employee, and your PPP loan is fully forgiven, you’ll have to pay back the EIDL advance.

According to the NFIB, discussions on the PPP continues in Congress, to include another round of funding, a broadened forgiveness process, and possible deductibility of forgiven expenses.

Keep in mind the old adage: patience is a virtue. Bankers want to help you with your loan, but remember that filling out documents correctly and delivering them through the proper channels is still your responsibility.


Additional funding for small businesses during the pandemic

A traditional low-cost SBA 7(a) loan can help you transition back into full operation by providing working capital or debt refinance. An SBA 7(a) loan has several advantages compared to other options including:

  • Low interest rates
  • Long terms
  • Very low monthly payments
  • Available for many uses
  • Can help build business credit
  • No prepayment penalty

Read more here: Rebuild Your Business with an SBA 7(a) Loan.

If you need funds faster, consider applying for a bank term loan. SmartBiz currently offers term loans through its bank partners for working capital, debt refinance, and new equipment purchase:

  • $30,000 to $500,000 loan amounts
  • 2 – 5 year repayment terms
  • Fixed interest rate*
  • Monthly repayments
  • No pre-payment penalties

*Interest rate depends on loan term and the applicant's credit and financial profile.

Learn more about Bank Term loans available through the SmartBiz bank network: Bank Term Loans.

Additional resources

The SmartBiz Loans team has been hard at work to keep small business owners updated on the new developments on our small business blog.

Here are published articles about small business funding and rebuilding strategies during the 2020 pandemic. Keep checking in for new content around the issues important to U.S. small business owners as we move towards 2021.

The SmartBiz® Small Business Blog and other related communications from SmartBiz Loans® are intended to provide general information on relevant topics for managing small businesses. Be aware that this is not a comprehensive analysis of the subject matter covered and is not intended to provide specific recommendations to you or your business with respect to the matters addressed. Please consult legal and financial professionals, and the applicable SBA rules, for further information.