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Paycheck Protection Program Loan Forgiveness: Key tips to consider

UPDATE: The U.S. Small Business Administration is expected to launch a Paycheck Protection Program (PPP) loan forgiveness portal on their website, which would help streamline the process and allow small business owners to apply for forgiveness directly through the SBA.

A link to the portal is forthcoming, and will be posted on this page as soon as it's available so check this page again soon.

As we begin a new year, small business owners who applied for a Payment Protection Program (PPP) loan should be aware of the processes and requirements to apply for PPP loan forgiveness. Taking the following steps to complete the loan forgiveness process will give you peace of mind and may help you prepare for the upcoming tax season. 

Here are some key facts to consider as you start to navigate the process.

Get in touch with your lender

The U.S. Small Business Administration (SBA) began accepting forgiveness application forms on August 10, 2020. But while the SBA released its own form, borrowers must complete the forgiveness process through their lender, as they may have their own forms and requirements to process the application. 

Some additional documents you may need to submit are:

  • Payroll records
  • Receipts and agreements for approved non-payroll costs (mortgage interest, rent, utilities)
  • Other documents deemed necessary by the SBA

Be aware of the timeline

Small business owners may apply for PPP loan forgiveness at any time before the loan is due, but experts advise borrowers to initiate and complete the application forms within 10 months of having received the loan. After the initial 10 months pass, the PPP funding converts to a loan (at 1% interest rate) so you still have some time to get your application in.

You may not need to complete the loan forgiveness application

Congress recently approved a simplified forgiveness process for PPP loans under $150,000, which only requires borrowers to sign and submit a one-page SBA-approved certification to the lender. Borrowers will also need to provide a description of the number of employees retained due to the loan, and the estimated amount of the covered loan spent on payroll costs and the total loan amount. Borrowers must attest that they complied with PPP loan requirements, including that at least 60 percent of the funds were spent on payroll.

The SBA announced on July 6, 2021 that it would eliminate the loan necessity review for PPP loans of $2 million or more, and said further guidance would be forthcoming.

Who qualifies for the EZ Forgiveness Form?

Certain borrowers are eligible to fill out the EZ Form, which is a simplified loan forgiveness form. Borrowers are eligible to fill out the EZ form if they meet one of the following criteria:

  • Are self-employed and have no employees; OR
  • Did not reduce the salaries or wages of their employees by more than 25%, AND did not reduce the number or hours of their employees; OR
  • Experienced reductions in business activity as a result of health directives related to COVID-19, AND did not reduce the salaries or wages of their employees by more than 25%.

For more information and to see the frequently asked questions on loan forgiveness, visit the U.S. Small Business Administration's FAQ about PPP Loan Forgiveness.

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