AUGUST 2021 UPDATE:
Business owners can now apply for forgiveness directly with the Small Business Administration (SBA). This option is only available to borrowers with loans of $150,000 or less -- which is 95 percent of all loans issued in 2021.
The new forgiveness platform for loans $150,000 or less began accepting applications from borrowers on August 4th, 2021, here:
Borrowers that need assistance or have questions should call the SBA at (877) 552-2692, Monday – Friday, 8 a.m. - 8 p.m. EST.
If your PPP amount is over $150, 000 and you received your PPP loan through a bank in the SmartBiz network, your bank will be contacting you directly about applying for Forgiveness. Otherwise, you should reach out to your lender for information about when you can apply with them.
SBA Administrator Isabel Casillas Guzman shares additional details in an SBA press release:
“These entrepreneurs are busy running their businesses and are challenged by an overly complicated forgiveness process. We need to deliver forgiveness more efficiently so they can get back to enlivening our Main Streets, sustaining our neighborhoods and fueling our nation’s economy.”
If you’ve secured a first or applied for a second SBA Paycheck Protection Program (PPP) loan in 2021, it’s important to keep track of the use of proceeds so you can apply for PPP loan forgiveness.
However, that’s not the end of your required documentation if seeking loan forgiveness. There are important steps to take to make sure your PPP loan is fully – or partially – forgiven. Here’s a breakdown of the forgiveness process so you can get a clear picture of your loan forgiveness obligations and make a list of specific questions.
If you're not able to use the SBA Forgiveness Portal, applications for loan forgiveness are processed by your lender. You need to fill out a PPP loan forgiveness application form and submit that to your lender. After you submit your application for forgiveness, your lender is required by law to provide you with a response within 60 days
The application for forgiveness is due within 90 days of the expiration of the eight-week post-funding period.
Good news for PPP borrowers: forgiven PPP loans are not taxable. Congress specified, and the IRS clarified, that forgiven PPP loans will not count as income. This applies whether the entire loan is forgiven or just a portion.
Your state may still expect you to pay income taxes on forgiven PPP loan amounts, which could be substantial depending on loan amount. Here's a list of some of the states who are currently planning to tax forgiven amounts on PPP loans:
The Small Business Administration (SBA) issued the one page form for PPP loan forgiveness and the agency also published additional updated forms, revised on January 19th, 2021.
Other forms to complete include:
If you received an SBA PPP loan during the two rounds of funding, you are eligible if certain criteria is met.
Your lender will provide a form for loan forgiveness documentation, calculations and certifications for accuracy. Forgiveness calculation is based on the eight (8) week period from date of final loan disbursement (not the approval date).
The PPP program has no credit score requirement, so SmartBiz does not use it in the PPP loan application.
Employers can apply for full or partial forgiveness if they spend their loans on qualifying expenses over the eight weeks after receiving a loan. Qualifying expenses include:
New approved use of proceeds have been added for the 2021 2nd round and include:
On January 19th, 2021, the SBA released this document: 2nd PPP Loans: How to Calculate Revenue Reduction and Maximum Loan Amounts Including What Documentation to Provide.
Important information on the following details are provided in these guidelines including the documentation needed to provide to corroborate that a business sustained at least a 25 percent reduction in gross receipts:
PPP forgiveness is slightly different for sole proprietors and independent contractors. The biggest difference is “owner compensation replacement” which simplifies the loan forgiveness process.
For more information, visit the Bench Blog: Loan Forgiveness for Independent Contractors or Sole Props.
PPP loan terms are generous and offer the lowest-cost working capital around.
If you don't get a portion of your loan forgiven, you'll be responsible for paying back the loan with a 1% interest rate. PPP loan payments are deferred. The entire loan is due in two years (if you were approved before June 5, 2020) or five years (if you were approved after June 5, 2020). In both cases, you can repay early without any prepayment penalties or fees.