The NFIB Small Business Legal Center (SBLC) has received thousands of questions in recent months regarding the Small Business Administration’s Paycheck Protection Program (PPP) and Economic Injury Disaster Loan (EIDL) program. Through our webinars, email responses, and returned phone calls, the SBLC aims to help small businesses by directly answering your questions.
Here we have compiled some of small business owners’ most frequently asked PPP and EIDL questions.
Paycheck Protection Program (PPP)
- How/where do I apply for loan forgiveness?
PPP borrowers have three forgiveness applications to choose from – the Form 3508, Form 3508EZ, and Form 3508S, for borrowers with loans of $50,000 or less. Links for the three applications and instructions are available at treasury.gov and here:
- Click here to download the Paycheck Protection Program Loan Forgiveness Application (06-16-2020) (Spanish version)
- Click here to download instructions for the Paycheck Protection Program Loan Forgiveness Application (06-16-2020)
- Click here to download the Paycheck Protection Program EZ Loan Forgiveness Application (06-16-2020)
- Click here to download instructions for the Paycheck Protection Program EZ Loan Forgiveness Application
- Click here to download the Paycheck Protection Program 3508S Forgiveness Application ($50,000 and less)
- Click here to download instructions for the Paycheck Protection Program 3508S Forgiveness Application ($50,000 and less)
- What are the tax consequences of PPP loan forgiveness?
The IRS will not treat PPP loan forgiveness as taxable income. However, individual states may choose to do so. Also, expenses paid for with your PPP funds cannot be written off as deductions on your taxes. The IRS views this as double-dipping, and although there is a bill before Congress to allow these deductions, it is unlikely to pass.
- How do I factor in rent payments to myself for loan forgiveness?
Rent payments of property owned by business owners are limited to the amount of mortgage interest and forgiveness is only available up to that amount of mortgage interest. If there is no mortgage on the property, you will not be able to get loan forgiveness for this rent cost.
- How long/what is the loan forgiveness process?
Loan forgiveness applications are just starting to be processed, so we are unsure how long the process will actually take. You begin by submitting the application through your specific lender. Under the statute, your lender has 60 days from the time you submit your application to approve it and send it to the SBA. After this, the SBA has 90 days to make a final forgiveness determination. At that point, the SBA will notify your lender of the decision, and your lender will in turn notify you.
- Are PPP funds still available?
No. NFIB is advocating for Congress to pass a second round of PPP loans for small businesses and we are hoping to have some clarity on the availability of these funds soon.
- Can I use all of the loan funds for payroll and how will this impact forgiveness?
Absolutely! This will likely simplify your forgiveness application process as well. Just enter the full amount of the loan under payroll and insert “0” in the remaining amount boxes.
- Do I need to use the 8-week or 24-week covered period when applying for forgiveness?
If you received your loan prior to June 5th, you may use either the 8-week covered period or the 24-week covered period. Borrowers who received their loan on June 5 or later must use the 24-week covered period.
- I’ve heard rumors that some forgiveness might be automatic. Is this true?
Partially, yes. For a while now, it has been up in the air whether Congress would approve automatic loan forgiveness for loans under $150,000. Banks and borrowers are still waiting on that determination. However, the SBA just released a one-page forgiveness application for loans under $50,000. This application can be found here, and the instructions here.
You submit your loan forgiveness application to your lender. Some lenders are currently not accepting applications until there is more clarity about auto-forgiveness. It is best to reach out to your specific lender regarding their process.
For more information on PPP loan forgiveness, please see our webinar slides and Q&A from 9/30/2020.
Economic Injury Disaster Loan (EIDL)
- I received both an EIDL and PPP loan. Will the EIDL affect the PPP loan forgiveness determination and/or amount?
No, the EIDL loan will not impact your PPP loan forgiveness. However, if you received an EIDL advance grant, that grant amount will be subtracted from your PPP loan forgiveness amount.
- Is the EIDL still available?
YES! You can apply for the EIDL here. While advance grant funds are exhausted, there are still loan funds available.
- Is the EIDL forgivable?
Unfortunately, no. It is a 30-year loan with a 3.75% interest rate. We do not anticipate Congress making any changes allowing for EIDL forgiveness.
- When are these EIDL payments due and how do I find out the status of my loan/loan application?
EIDL payments are deferred for 1 year after the disbursement of the loan, although you may start paying on your loan earlier than this. Interest does accrue on the loan during this deferment period. For questions about your payment amount, due date, or anything else regarding the specifics of your loan, please contact the SBA directly at: (800-659-2955) or [email protected].
- What are the restrictions on the use of EIDL funds?
EIDL funds are meant to help small businesses survive during an incredibly tough time. The funds are meant to be working capital used to pay ordinary expenses of the business, including payroll costs (benefits as well), fixed debts, accounts payable, and other bills. You cannot use EIDL funds to expand your business or pay down principal on long-term debt.
- What does the SBA take into account when determining whether I qualify for an SBA loan?
The most important consideration is whether your credit score is above a certain minimum threshold. If so, then the SBA will consider the economic injury to your business, minus any insurance available, minus potential personal contributions from the owner or partners, and minus other recoveries available, in determining the amount of your loan.
As always the NFIB SBLC will continue to bring you the most up-to-date information we have regarding the EIDL and PPP loans.
Updated November 2, 2020