PPP loan forgiveness update 2021 (what you need to know)

Learn what PPP loan forgiveness updates have been made for 2021, including SBA’s PPP Direct Forgiveness Portal, additional eligible expenses, simplified forgiveness forms, and more!

  • NEW UPDATE! SBA PPP Direct Forgiveness Portal announced
  • What PPP loan forgiveness updates have been made for 2021?
  • What additional eligible expenses for PPP forgiveness have been specified?
  • New simplified forgiveness form for all PPP loans under $150K
  • How to apply for PPP loan forgiveness

URGENT PPP FORGIVENESS UPDATE: On July 28, 2021, the SBA announced big news (for most PPP borrowers). The SBA has established an online PPP forgiveness platform called the SBA PPP Direct Forgiveness PortalIf your PPP loan was for $150,000 or less, AND if your lender has opted-in to the use of the platform, you will be able to submit your PPP loan forgiveness application online directly to the SBA, using the electronic equivalent of SBA Form 3508S. For full details, read our post about the new SBA PPP Direct Forgiveness Portal and other recent rule changes.

Since the Paycheck Protection Program has been renewed several times over the course of the coronavirus pandemic and the resulting financial crisis, many people are confused about the rules for PPP forgiveness in 2021. Let’s go over the key points and hopefully clear up any confusion.

PPP forgiveness update for 2021 adds additional eligible expenses

There have been many updates to the original PPP terms over the course of the program. One of the more significant PPP loan forgiveness updates for 2021 is latest round of PPP funding adds more eligible forgivable expenses, so more small businesses may take greater advantage of this relief package. 

The 2021 PPP renewal bill makes the following expenses allowable and forgivable use of Paycheck Protection Program funds, in addition to the previous covered expenses:

  • Covered operations expenditures: Payment for any software, cloud computing, and other human resources and accounting needs
  • Covered property damage costs: Costs related to property damage due to public disturbances that occurred during 2020 that are not covered by insurance
  • Covered supplier costs: Expenditures to a supplier pursuant to a contract, purchase order, or order for goods in effect prior to taking out the loan that are essential to the recipient’s operations at the time at which the expenditure was made. Supplier costs of perishable goods can be made before or during the life of the loan
  • Covered worker protection expenditures: Personal protective equipment and adaptive investments to help a loan recipient comply with federal health and safety guidelines or any equivalent State and local guidance related to COVID-19 during the period between March 1, 2020, and the end of the national emergency declaration

The new language also allows PPP loans before, on, or after the new bill to be eligible to utilize the expanded forgivable expenses, unless you’ve already applied for and received PPP forgiveness for your loan.  

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2021 PPP forgiveness update includes a simplified application form for loans under $150K, PLUS new SBA PPP Direct Forgiveness Portal

On July 28, 2021, the SBA announced big news (for most PPP borrowers). The SBA has established an online PPP forgiveness platform called the SBA PPP Direct Forgiveness PortalIf your PPP loan was for $150,000 or less, AND if your lender has opted-in to the use of the platform, you will be able to submit your PPP loan forgiveness application online directly to the SBA, using the electronic equivalent of SBA Form 3508S. For full details, read our post about the new SBA PPP Direct Forgiveness Portal and other recent rule changes.

The 2021 update to the PPP rules includes a streamlined PPP forgiveness application for all borrowers who receive less than $150,000 in loan funds. The new simplified forgiveness form is Form 3508S.

If you received $150,000 or less, then you will use use Form 3508S or a lender equivalent. Read our step by step walkthrough for completing PPP loan forgiveness form 3508S.

If you received more than $150,000, then you’ll use Form 3508 or 3508EZ or a lender equivalent, depending on the requirements that you need to meet. If you meet one the following requirements, then you’ll fill out 3508EZ:

  • You are self-employed and don’t have employees
  • You have employees but maintained your employee count, did not reduce employee hours, and did not reduce employee wages by more than 25%
  • You have employees and did not reduce their wages by more than 25% and could not operate normal hours as a result of decreased business operations from adhering to COVID-19 public health guidelines

If you don’t meet those requirements, you’ll fill out Form 3508. Read our PPP loan forgiveness application instructions for completing form 3508 and 3058EZ.

PPP loan forgiveness update 2021: special exemption for loans of $50K or less

For 2021 there are certain exceptions to the “maintaining employee levels and compensation” rule. (The general PPP rules state that in order to maintain full PPP forgiveness, you must maintain employee and compensation levels.)  If you received a PPP loan that was $50,000 or less, for 2021 you are exempt from having to maintain your employee and compensation levels in order to receive loan forgiveness. Your loan must still be spent on approved costs and you will still need to document that you spent at least 60% of your funds on payroll expenses to achieve full loan forgiveness.

For PPP loans made after December 27, 2020, you don’t need to restore payroll or headcount to previous levels in order to receive forgiveness

PPP Loans received after December 27th, 2020 are not required to “rehire” any employees or restore payroll to previous levels in order to receive forgiveness (if this is applicable to you and your business). You will, however, need to maintain current payroll levels during the forgiveness period. (Exceptions to this would include employees who resign or are terminated with cause).

Of course, if you are an independent contractor, gig worker, freelancer, or sole proprietor without employees, you don’t have to worry about this anyway.

The PPP loan forgiveness update for 2021 removes the deduction of any EIDL advance deduction for PPP loan forgiveness

The 2021 PPP update bill repealed section 1110(e)(6) of the CARES Act, which required PPP borrowers to deduct the amount of their EIDL advance from their PPP forgiveness amount. So if you were one of the lucky ones who got a $10K EIDL grant/advance in 2020, you originally had to subtract that amount from your PPP loan forgiveness request amount. This will no longer apply for 2021.

How do I apply for PPP loan forgiveness in 2021?

To apply for PPP loan forgiveness, you’ll need to fill out the appropriate forgiveness application (see above) with your PPP lender. PLEASE NOTE: Different SBA lenders may have different processes and may even have a “lender specific” forms for PPP forgiveness. Be sure to consult with your lender and follow their instructions.

You will fill out your form with your lender, using any documentation necessary to verify how you spent your PPP funds. This might include bank statements, invoices, cancelled checks, lease agreements, utility statements, etc. If you aren’t sure what to include with your application, talk to your lender. 

When you complete and submit your application with your lender, they will then submit it to the SBA. The SBA then has up to 90 days to make a final decision on your loan forgiveness. Once an SBA decision has been made, your lender is responsible for notifying you of that decision. 

If your loan is fully forgiven, then the process ends and you don’t have to worry about paying anything back, including any interest that may have accrued.

If you only receive partial loan forgiveness or you end up having to pay the full loan back, your lender will provide you with the repayment terms, including the date when your first payment is due. 

Additional info about PPP loan forgiveness update in 2021 

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