Beginning of the closing of the PPP loan forgiveness period; Payments may be due

PPP borrowers who took out loans in 2020 will soon have their first payments due if they do not request the forgiveness.

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July 7, 2021

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Small business owners who got a Paycheck Protection Program (P3) loan in 2020 should pay close attention to their forgiveness period as the window of time to avoid principal and interest payments is ending. . For example, if you got a P3 loan on April 15, 2020 and took the maximum coverage period of 24 weeks, you will have until August 30 to request a rebate. If you do not apply for the remission on time, you will be responsible for the monthly interest and principal payments on the loan. While you can always request a rebate later, you will make monthly payments of principal and interest until your rebate request is approved by the bank and the Small Business Association (SBA). The bank and the SBA have up to five months to approve your pardon request.

The latest SBA reported in May that more than 70% of PPP loans granted in 2020 have already been canceled. They also noted that over 1.7 million PPP loan borrowers had not even requested cancellation. If you’re a small business that hasn’t applied for your 2020 PPP loan forgiveness, you’ll want to act fast to avoid future monthly payments.

Related: New Stimulus Bill Includes Second Round of P3 Small Business Loans, Borrower-Friendly Forgiveness Rules Changes

Pardon Period Calendar and Approval Timeframe

A rebate request must be submitted within 12 to 16 months of receipt of funds by the small business. This approximate timeframe takes into account the covered period of 8 to 12 weeks when no payment is due and the 10-month period that the law automatically grants when there is no payment of principal or interest.

What forgiveness request should you submit?

The rebate request is submitted to the bank that loaned the PPP funds to the small business. There are different forms of forgiveness that can be used. Some look like a tax return and require documents (the 3508) while others are straightforward and do not require calculations or documentation (the 3508S).

3508S simple

Small businesses that have obtained a loan of less than $ 150,000 should use the Form 3508S application. This request is one page and does not require any calculation other than the loan amount and the forgiveness request amount. If you’ve properly used the funds for payroll and other approved expenses such as rent and utilities, this application should take less than 10 minutes to complete.

Easy 3508EZ

Those who haven’t cut their full-time equivalent (FTE) by more than 25% in 2020, but whose loan is over $ 150,000, should use the easiest way Form 3508EZ application. You can also use the EZ app even if your FTE workforce was reduced, as long as that reduction was due to Covid-19 health restrictions imposed on the company (for example, restaurants that could only operate at 50% of their capacity).

Related: SBA Approves Simple One-Page PPP Forgiveness Request for Loans of $ 50,000 or Less

Full application

Companies with more than 25% FTE reductions in 2020 that were not the result of Covid health restrictions will complete the much longer and more complicated task Form 3508. (My previous article on PPP pardon request options can be found here.)

If your small business hasn’t submitted a 2020 First Draw PPP loan forgiveness request, contact your bank or other PPP lender as soon as possible. Banks are motivated to help you with the forgiveness because the SBA repays the loan for you when the forgiveness request is approved. While there was chaos and confusion when PPP loans were first issued in 2020, the forgiveness process is much simpler, and the SBA and banks have better advice and a better process. more streamlined.

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