Small Business Administration releases PPP loan forgiveness details

MOSES LAKE — The Small Business Administration has released details about the loan forgiveness portion of the Paycheck Protection Program (PPP) made earlier this year as part of the first major COVID-19 pandemic relief legislation.

However, according to Allan Peterson, a business development specialist with the Small Business Development Center in Moses Lake, like most rules and regulations associated with the multi-billion dollar bailout program, those governing loan forgiveness are still being changed.

Especially for businesses that borrowed $150,000 or less.

“Don’t rush into filing the paperwork. They are still fine-tuning the details, especially for loans under $150,000,” Peterson said, advising borrowers.

Peterson said there is talk of new legislation that would simplify the forgiveness process for small borrowers, which would help many of the 5,900 banks and financial organizations that facilitated PPP loans operate the program.

“Not all of them are regular SBA lenders, and they have a lot of rules to abide by that they don’t normally abide by,” he said. “If they could make it simpler, that would benefit everybody.”

The PPP was instituted as part of the $2 trillion Coronavirus Aid, Relief and Economic Security Act that was passed by Congress in March 2020. It eventually came to provide nearly $700 billion in loans to small businesses — including sole proprietors and independent contractors — to help cover payroll, rent and other business costs lost from late April through early October as a result of the COVID-19 closures. The loans are meant to keep people employed.

Funds used for that purpose were always intended to be forgiven, though until recently there were no rules for that.

Under the SBA guidelines, forgivable payroll costs include “all forms of cash compensation” including tips, commissions and bonuses up to $100,000 per employee. The portion of the loans used to cover employer health care costs or retirement contributions — but not employee costs — can also be forgiven.

The amount of compensation business owners can deduct for themselves varies according to the type of business structure — C corporation, S corporation, self-employed, general partners or owners of limited liability corporations — according to the guidelines.

Business owners with questions on loan forgiveness should contact their SBA lender.