Loan Forgiveness For SBA’s Paycheck Protection Program

Posted by Karen Erdelac on Oct 13, 2020

Loan Forgiveness For SBA’s Paycheck Protection ProgramWhile the process is still uncertain, merchants should begin to prepare now.

For many small businesses, the federal Paycheck Protection Program (PPP) proved to be a lifeline that helped them survive the early days of the COVID-19 pandemic. By the end of the application period, 5,500 lenders approved roughly 5.2 million loans totaling $525 billion. The average loan size was approximately $101,000.

Restaurants significantly benefitted from the program, designed to help keep their staff on the payroll as the pandemic shut down the economy. Nearly 50,000 restaurants received loans of at least $150,000.

The program had an important caveat. If businesses used the money for specific purposes, including payroll costs, interest on rent or mortgages, and utilities, owners wouldn't have to pay the loans back. Now it’s time for companies that received funding from the PPP to apply for loan forgiveness.

To qualify, employers have to submit forms with their SBA PPP loan number, the disbursement date, the number of employees they have, and the payroll schedule.

While that sounds clear enough, there are still many outstanding issues.

  1. Recently, some PPP borrowers received notices from lenders that payments on their PPP loans were due. However, the SBA has extended the deferral timeline. (Read more here.) The deferral period extension automatically applies to all PPP loans, with no requirement from the SBA for a formal modification of the promissory note.
  1. The SBA also announced the release of a simple forgiveness application for merchants that received loans of $50,000 or less.
  2. Most experts agree that the first place for businesses to start the loan forgiveness process is with their lender. While many lenders have yet to announce the process they will follow, merchants must begin gathering the required documents and preparing their loan forgiveness applications now.

For more information, check out the SBA’s PPP FAQs. Business owners can also reach out to their local SBA office for guidance.

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