Small businesses have had QUITE the past year and a half. A lot of SMB owners had to shut their shops down. Others had to cut hours. Most saw a drop in sales for at least a period of time. And everyone had to reevaluate their future and learn how to adapt to an ever-changing situation.

For many small businesses, federal and state governments did provide some important relief. The Small Business Administration (SBA) and U.S. Congress passed the CARES Act that included the Payment Protection Program (PPP) and other emergency relief resources for businesses that were impacted by the COVID-19 pandemic.

For those that received any PPP loans through a lender that is participating in direct forgiveness, the opening day to apply for forgiveness is August 4, 2021. Below we’ll outline what the PPP is and how small business recipients of the loan can apply for complete forgiveness.

Who Got PPP Loans?

While there were some exceptions, any business that had fewer than 500 employees could apply for the loan.

Recipients had to have been in business by February 15, 2020 and applications were open from April 3, 2020 to June 30, 2020.

What Did the PPP Cover?

Any PPP loan had to be used primarily to cover payroll. In addition to hourly wages and salaries, PPP money could be used for sick, vacation, and parental leave, retirement benefits, commission, and contract work.

Initial loans could be up to 2.5x a business’s monthly payroll costs.

How Can Small Businesses Qualify for Loan Forgiveness?

One of the most interesting aspects of this program was that the SBA was offering full forgiveness on these loans for businesses that followed certain guidelines.

  • First, all employees must have been paid for at least 8 weeks after the company received the loan.
  • At least 60% of the loan must have been used on payroll expenses.
  • No one’s wages could be reduced by more than 25% at any time. And all wages must have been returned to their pre-pandemic amount by June 30, 2020.
  • Proof of the loan and all uses of it must be given at the time of the reimbursement request.

How Do Businesses Apply for PPP Loan Forgiveness?

All borrowers are eligible to apply for forgiveness once all proceeds of the loan have been used. The deadline to apply for forgiveness is at the maturity date of the loan.

There is an important distinction in how to apply for loan forgiveness based on your lender:

For those businesses that received the loan through a lender that is participating in direct loan forgiveness, you apply for forgiveness directly through the SBA’s online portal after August 4, 2021.

For those that received the loan through a lender not participating in direct forgiveness, all applications must be submitted directly through the lender. 

You can find a list of participating lenders here.

What Documentation Should Businesses Have Prepared?

Though recipients of the loan often won’t be prompted to provide additional documentation, the SBA may request some further information as part of an audit process.

  • Bank account statements showing the amount of compensation paid to all employees and contract workers
  • Tax forms that correspond with the period of time in which the loan was distributed and used at the business
  • All receipts of employer contributions to employee health insurance and retirement plans
  • Do not include any wages that were paid using any other federal relief aid, such as the Employee Retention Credit or Taxpayer Certainty and Disaster Tax Relief Act.
  • Any mortgage, rent, or lease payments for the business
  • Business utility payments
  • Operation expenditures that are covered by the loan
  • Property damage costs
  • Relevant supplier costs
  • Worker protection expenditures

How Else Can Businesses Prepare for Loan Forgiveness?

Once you’ve submitted your application for forgiveness make sure you’re monitoring the status closely. The government will be dealing with a sudden influx of applications and it will take some time to sort through all of them. Business owners can also contact the SBA call center at 877.552.2692 Monday-Friday, 8 AM-8 PM EST.

The SBA has also provided some helpful information for small businesses:

With anything like this it’s important to stay organized and meet deadlines promptly. Hopefully, this quick guide helps you do so. If you’re a current customer and have any questions don’t hesitate to reach out to us and we’ll do our best to help out.

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