For the past few months, a bill has been pending in Congress that would automatically forgive PPP loans under $150,000. If this law is approved, small businesses who received a PPP loan of less than $150,000 would have their loan automatically forgiven without having to file the forgiveness application with their bank.
As of today, Congress still has not approved automatic forgiveness of PPP loans for small businesses.
Because the forgiveness application is lengthy, many small businesses are waiting to file their applications in the hopes that Congress will approve automatic forgiveness, and there is still plenty of time to wait and see if Congress acts. The current deadline to apply for PPP forgiveness is 10 months after the end of your loan’s “covered period.” The covered period is the length of time that you must spend your loan after receiving it.
If you received your PPP loan before June 5, 2020, your loan’s covered period is either 8 weeks or 24 weeks after the date you received your loan, whichever you choose. If you received your PPP loan after June 5, 2020, your loan’s covered period is 24 weeks after the date you received your loan.
If you do not apply for forgiveness within 10 months of the end of your loan’s covered period, your PPP loan will become an actual loan that you will have to pay back with a 1% interest rate for a term of 2 years (if your loan was approved prior to June 5, 2020) or 5 years (if your loan was approved after June 5, 2020).
To apply for loan forgiveness, you will need to file an application, Form 3508, with the bank that issued the loan to you. You can download the forgiveness application by clicking here, and the instructions by clicking here.
If your business did not reduce the number of its employees or their wages, you can use the more streamlined Form 3508EZ. The simplified forgiveness application can be downloaded by clicking here, and the instructions by clicking here.