October 2021 Update
The SBA Paycheck Protection Program (PPP) expired on May 31, 2021. However, loan applications were processed through June. At this point, providers that received a PPP loan need to apply for forgiveness (which is what turns the “forgivable loan” into a grant). Providers can apply for forgiveness as soon as all the loan funds are spent. This means that PPP applications submitted on or before May 31 will continue to be processed in June. However, no new applications will be accepted unless Congress extends the program. Borrowers need to apply for forgiveness within 10 months of spending the money (in order to qualify for forgiveness).
The SBA Paycheck Protection Program (PPP) Online Forgiveness Portal
In August 2021, the SBA opened a new online PPP loan forgiveness portal for loans of $150,000 or less. This means that businesses that received a PPP loan can apply online through the SBA instead of going through their lender that approved the loan.
The SBA created the new online forgiveness portal to help expedite forgiveness approval, which turns the loan into a grant (i.e., borrowers will not have to repay it). The new online portal is designed to speed up the approval of forgiveness for small loans ($150,000 or less).
How the SBA Online Forgiveness Portal Works
The online portal requires borrowers to submit the same information that they otherwise would have filled out on a bank form. It can be faster for borrowers to receive forgiveness because they won’t have to depend on their bank queue of review for approval, which could include both large and small loans. Because the online portal is designed only for small loans, the process could be faster.
In order to use the SBA online portal, your bank must opt-in (which is a bank process partnering with the SBA). More than 1,400 banks have opted in as of September 23. Check here to see if your bank has opted in. Because the portal is new, it is expected that many more banks will be opting in over the next few weeks.
Be prepared! Review the form below of required information (the same information is required through the online portal as would be required through a bank form).
SBA Form 3508S. This form is for borrowers of $150,000 or less. It’s a short one page form. No calculations are required. Borrowers do not need to submit documentation. However, the SBA requires retaining all records for Form 3508S for four years (in case borrowers are subject to a random audit).
SBA Online Forgiveness Portal Tips! When you first visit the online portal, you will be required to set up an account (with your email) and create a password. Write down the password to save it! You will receive an email to verify that you want to create an account. It’s quick, just click on the link and confirm. Once your account is set up (which is really fast), you will need to have this information ready to submit through the portal:
- EIN, SSN, or ITIN
- SBA Loan #
- Gross Receipts 2019
- Gross Receipts 2020
- # of employees at time of application (remember: family child care providers need to claim themselves as an employee, so your answer would be “1” unless you have an employee, and then your answer is “2”, which includes yourself)
- # at time of forgiveness (same as above)
- Amount of PPP spent on payroll
SBA Portal User Guide! The portal is really simple. However, reading through the user guide can make the portal submission process much faster and may help answer any questions you have. If you do have questions, the SBA has set up a hotline where a team of SBA staff are ready to answer any question! If you have two PPP loans (a first draw loan and a second draw loan, you must apply for forgiveness for each loan separately).
SBA Hotline: 877-552-2692
Brief Background About PPP loans. Congress created the PPP “forgivable loan” (in other words, a grant) for small businesses in March of 2020. Congress has extended PPP several times. In December 2020, Congress separated PPP into two programs.
- First Draw PPP forgivable loans are for businesses that did not receive a PPP forgivable loan in 2020.
- Second Draw PPP forgivable loans are for businesses that received a PPP forgivable loan, but still have additional need for financial support. The Second Draw PPP loans are restricted to businesses with 300 or fewer employees and must be able to show at least a 25% reduction in revenue between comparable quarters in 2019 and 2020.
As long as borrowers use the funds for eligible expenses, borrowers can apply for “forgiveness”, which is what turns the loan into a grant that does not need to be repaid. Borrowers need to apply for forgiveness within 10 months of spending the money.
Overview of Eligible Expenses for Forgiveness
In general, in order for forgiveness to be approved, at least 60% of the funds must be used for payroll related costs. This means up to 40% of the loan can be used for fixed costs such as mortgage interest, rent, utilities, software used for your business (e.g., for record-keeping or supporting other business operations), perishable goods (such as food costs), expenses for PPE, cleaning supplies, and other expenses related to social distancing and public health requirements related to COVID. For family child care providers, you are eligible for a PPP forgivable loan whether or not you have employees. (For example, for purposes of the PPP loan, an FCC provider is considered an employee).
Allowable Expenses for Non-payroll Uses of PPP Funds. Four additional categories of eligible expenses for fixed costs were added through legislation enacted in December.
- Covered Operations Expenditures. Costs related to business software or cloud computing services that support business operations, billing, accounting, or record-keeping. For example, for child care programs, this means the cost of child care management system software that supports business operations or other business support.
- Covered Property Damage. Property damage due to public disturbances that occurred during 2020 that are not covered by insurance.
- Covered Supplier Costs. Expenses pursuant to a contract, order, or purchase order with respect to perishable goods and other items. For example, for child care programs, this means the purchase of food served to children.
- Covered Worker Protection Equipment. Expenses that support business activities to comply with COVID requirements established by the U.S. Department of Health and Human Services, Centers for Disease Control, Occupational Safety and Health Administration, or any equivalent requirements or guidance by a state or local government during the pandemic. For example, for child care programs, this means expenses for PPE, cleaning supplies, sneeze guards, portable water stations, and other expenses related to social distancing and public health requirements related to COVID.
Note: Although expenses related to fixed costs were expanded in legislation enacted by Congress in December, the requirement for at least 60% of PPP loans to be used for payroll related purposes remains in place. Payroll expenses include cash compensation, employer contributions for group health, life, disability, vision or dental insurance and employer contributions to employee retirement plans (exception: benefits for the self-employed (e.g., family child care providers) are not included because the SBA considers such payments already included in compensation).
Each of the SBA Forms that correspond to PPP loans is accompanied by detailed instructions: 4 pages of instructions to explain SBA Form 3508S, 5 pages of instructions to explain SBA Form 3508EZ, and 8 pages of instructions to explain SBA Form 3508.
For help in completing SBA forms, ask your lender or reach out to your local Small Business Development Center (SBDC) or, call the SBA Hotline: 877-552-2692 for help with the portal.