08/04/2021

SBA Streamlines Forgiveness for Smaller PPP Loans

It's intended to expedite the forgiveness process for certain borrowers

The Small Business Administration (SBA) has released new guidance intended to expedite the forgiveness process for certain borrowers under the Paycheck Protection Program (PPP). The simplified process generally is available for loans of $150,000 or less, which the SBA reports account for 93 percent of outstanding PPP loans. The guidance comes at a time when many borrowers are nearing a critical deadline regarding their applications for forgiveness.

PPP Loans – Forgiveness basics

PPP loans generally are 100 percent forgivable if the borrower allocates at least 60 percent of the funds to payroll and eligible nonpayroll costs. Borrowers may apply for forgiveness at any time before their loans’ maturity date. Loans made before June 5, 2020, generally have a two-year maturity; loans made on or after that date have a five-year maturity.

However, if a borrower fails to apply for forgiveness within 10 months after the last day of the “covered period,” its PPP loan payments will no longer be deferred. (The covered period is eight to 24 weeks following disbursement during which the funds must be used.) Such loans will become standard loans, and borrowers will be responsible for repaying the full amount plus 1 percent interest before the maturity date — unless the loan is subsequently forgiven. The 10-month period soon will expire for many so-called “first-draw” borrowers.

Please select this link to read the complete article from OSAE Strategic Partner Clark Schaefer Hackett.