The Small Business Administration (SBA), in consultation with the Department of the Treasury, last week opened applications to the Paycheck Protection Program (PPP) Loan Forgiveness. Various small businesses that have used government loans to stay afloat during the pandemic, now have the option to apply to have these loans forgiven with no hard deadline on the horizon.
The SBA has been proactive in providing support to over 30 million small businesses in the US during the COVID-19 pandemic. In March, the SBA provided disaster assistance loans offering up to $2 million for small businesses and non-profits in assistance. There are over 30 million small businesses in the US, which employ half the country’s workforce and pay 43 percent of total US private payroll.
Small business owners that decide to apply for full PPP loan forgiveness, must show 75 percent of their loans were used on payroll and the other 25 percent was spent on qualified expenses like rent or utilities that are critical to keeping their business afloat.
Rob Scott, regional administrator for the Small Business Administration, advises business owners to, “start to get your information together, and look at the application and roughly filling it out now, but there is no set hard deadline yet.”
The form and instructions inform borrowers how to apply for forgiveness of their PPP loans, consistent with the Coronavirus Aid, Relief, and Economic Security Act (CARES Act). SBA will also soon issue regulations and guidance to further assist borrowers as they complete their applications, and to provide lenders with guidance on their responsibilities.
To apply for loan forgiveness, businesses should visit this website and download and complete the application. Then, submit the application to their lender.
If filling out paperwork isn’t your favorite task, know that the SBA took some pains to make sure these forms include several measures to reduce compliance burdens and simplify the process for borrowers. Those measures include:
Options for borrowers to calculate payroll costs using an “alternative payroll covered period” that aligns with borrowers’ regular payroll cycles
Flexibility to include eligible payroll and non-payroll expenses paid or incurred during the eight-week period after receiving their PPP loan
Step-by-step instructions on how to perform the calculations required by the CARES Act to confirm eligibility for loan forgiveness
Borrower-friendly implementation of statutory exemptions from loan forgiveness reduction based on rehiring by June 30
The PPP was created by the CARES Act to provide forgivable loans to eligible small businesses to keep American workers on the payroll during the COVID-19 pandemic.