The Covid-19 pandemic brought sudden, unexpected closures to businesses worldwide. As government struggled to respond to the rapid spread of the virus and customers mostly stayed at home, many small business owners took advantage of the Paycheck Protection Program (PPP) portion of the Coronavirus Aid, Relief, and Economic Security (CARES) Act. Now, PPP forgiveness may be available to many small business owners who took out loans through the program, but it’s important to act quickly.
Paycheck Protection Program Forgiveness
The PPP was included as part of the CARES Act to help prevent mass layoffs due to the pandemic. Small business owners could apply for the loans on the basis that the money would help them keep people employed. Applications for new loans through the Paycheck Protection Program closed in August, and, as of this writing, it is unclear whether future loans will be made available through future federal legislation.
Designed as a short-term relief measure, many people hoped that the pandemic would be over in a matter of months and business would return to pre-pandemic levels. With case loads climbing during the fall months, and vaccination just beginning, small business owners are realizing that they will need more help to keep people on the payroll into 2021.
While you can’t apply for additional funds through PPP, the Small Business Administration (SBA) is offering a chance to apply for loan forgiveness. Small business owners would be advised to apply quickly, however. Rules governing the dispersal of funds have changed throughout the year and are unlikely to do so before the new year begins. It is also possible that the SBA will stop accepting forgiveness applications after a certain point, so it is wise to apply early.
Who is Eligible?
If you received a PPP loan under the CARES act in 2020, you may be eligible for PPP forgiveness. There are certain criteria required for loan forgiveness, and you will need to file an application with your lender. It’s a good idea to have your documentation ready before you start the application – much like doing your taxes, missing documents can delay the process by months.
According to the SBA, you may be eligible if:
- You have used all the funds for which you are asking forgiveness
- The funds were used on payroll, OR mortgage interest payments for your business OR rent and utilities
- The funds were used during the eligibility period after disbursement (either 8 or 24 weeks, depending on your loan)
If you’re uncertain if your business expenses check these boxes, it’s important to communicate with your lender. They will supply you with the necessary forms and can guide you through the process.
Other Emergency Relief for Small Businesses
The SBA does far more than just administer PPP loans. For eligible businesses, loans of up to $500,000 are available under the Disaster Relief loans program and the loan advance program for small businesses.
Additionally, there are a wide variety of state and local programs designed to support small businesses. You can view a list of available programs here. Private lenders are also still funding small businesses to help cover operating costs.
The paperwork necessary to obtain PPP loan forgiveness can take time and requires close communication with your individual lender. Expect delays as many small business owners seek loan forgiveness simultaneously. Keep in mind that while the principal on the loan can be completely forgiven, you will need to repay any accrued interest, so it is in your best interest to obtain loan forgiveness as quickly as possible.