New Paycheck Protection Program Loan Forgiveness and Repayment Rules 2021

Good news! There’s now a new round of Paycheck Protection Program funding for small business owners across America. The program opened for applications on January 11, 2021.

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 and rebuild. This 2021 round has the same goal.

Bank Term Loans Now • Pre-Qualify in Minutes

Here’s information you need to know about loan forgiveness for the current round of PPP funding.* It’s suggested that you start an application ASAP as these funds are expected to run out before the May deadline.

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

As of November 2020, the SBA has not set a deadline to apply for forgiveness, but you have 10 months after the end of your covered period before you'll be required to start making monthly payments.

This new round of PPP loans are eligible for loan forgiveness on the same terms and conditions as the initial PPP Loans, except that these second round PPP Loan borrowers with a principal amount of $150,000 or less are required to provide documentation of revenue reduction if such documentation was not provided at the time of the loan application

Here are 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 here is updated information. You can typically find these forms on your bank’s website or sba.gov.

  • 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. A Borrower that, together with its affiliates, received PPP loans totaling $2 million or greater cannot use this form.
  • As of January 8th, 2021, the SBA will no longer deduct EIDL Advances from forgiveness payments remitted to PPP lenders.

Keep in mind the old adage: patience is a virtue. Lenders 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

SBA 7(a) loan: 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
  • Can help build business credit
  • No prepayment penalty

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

Bank Term 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.

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Applying for a first or second PPP loan 2021

The SmartBiz streamlined PPP Loan application can help you fill out your application, upload required documents, and submit them to the bank quickly.**

SmartBiz can help you apply for these funds. We have specialized in SBA loans since 2013 and our network of banks has funded nearly $4 billion in SBA, PPP, and bank term loans.

Whether this is your first or second PPP loan, SmartBiz can help! Businesses with less than 500 employees that are negatively impacted by the pandemic can apply for their first PPP loan.

Start an application today here: PPP Loan Application

Additional COVID-19 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.

Keep checking in for new content around the issues important to U.S. small business owners during the continuing pandemic.

*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.

**Eligible applications submitted according to applicable requirements for PPP will be referred for review by a lending institution in the SmartBiz bank network. The availability of PPP funds is limited, and SmartBiz and banks in the SmartBiz lending network make no representations or guarantees that PPP funds will be available when you apply.

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