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When federal lawmakers created the Paycheck Protection Program (PPP) as part of stimulus legislation last spring, they added a potential lifeline for small businesses that were seeing their revenue decline as a result of the coronavirus pandemic. Entrepreneurs could borrow money through their local lenders and, if they used the money to pay employees or cover some other expenses, the loan would become a grant instead.
Businesses eagerly grasped at this aid. According to the Small Business Administration (SBA), the federal agency that manages the PPP, the program provided 5.2 million loans worth more than $525 billion to small businesses, helping to save millions of jobs.
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Many of the small businesses that borrowed through the PPP have now hit a key milestone: It's time to apply for loan forgiveness. Entrepreneurs who borrowed money through the PPP were given a period of 24 weeks to use the funds in order for the loan to become a grant. That means that businesses that borrowed in the early spring can now file the paperwork to have the loan forgiven.
That application process hasn't been quite as easy or automatic as some borrowers had hoped it might be. Among those business owners who took PPP loans, 62 percent said they were worried the loan might not be forgiven, according to a survey by the Main Street Alliance (MSA), an advocacy group for small businesses. Another 39 percent said they tried to start the process to convert their loans to grants but lenders weren't ready to handle applications.
To make the process of converting a PPP loan into a grant easier, the SBA recently released a streamlined application for businesses that borrowed $50,000 or less through the program. “The Paycheck Protection Program has been an overwhelming success and served as a historic lifeline to America's hurting small businesses and tens of millions of workers,” says SBA Administrator Jovita Carranza. The new application “demonstrates our relentless commitment to using every tool in our toolbelt to help small businesses and the banks that have participated in this program."
Here are answers to three key questions about the streamlined PPP forgiveness application:
1. Where can I get the forms?
Just as they were the key point in applying for federal PPP money, banks and other lenders also are where borrowers should go to start the loan forgiveness process. If you are a PPP borrower, reach out to your lender directly if they have not already contacted you about converting your loan to a grant. You can also find the necessary paperwork on the SBA website. You can find the PPP Loan Forgiveness Application Form 3508S for borrowers of $50,000 or less here. The instructions for completing that form are available here.