SBA Disaster Loan Forgiveness Application Steps and Guidelines

Applying for SBA disaster loan forgiveness can be a straightforward process if you follow the right steps. The Small Business Administration (SBA) requires borrowers to submit a forgiveness application to have their loans forgiven.

To begin, you'll need to gather all necessary documents, including your loan documents, tax returns, and payroll records. This information will help the SBA determine the amount of your loan that's eligible for forgiveness.

You can apply for forgiveness online through the SBA's website or through your lender. Make sure to submit your application within the required timeframe to avoid any delays in the forgiveness process.

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You can apply for forgiveness once you've used all the loan proceeds you're requesting forgiveness for. Borrowers can apply for forgiveness any time up to five years from the date that SBA issued the SBA loan number.

To qualify for full loan forgiveness, First- and Second-Draw PPP Loans require that employee and compensation levels are maintained. This means you must keep your staff and pay them similarly to how you did before the loan.

Here are the key expenses that are forgivable under the CAA, 2021:

To apply for forgiveness, borrowers can apply once they've used all the loan proceeds they're requesting forgiveness for. This is a crucial step to take advantage of the loan forgiveness benefits.

Borrowers have a five-year window to apply for forgiveness after the SBA issued the SBA loan number. This gives them ample time to gather necessary documents and prepare their application.

If borrowers don't apply for forgiveness within 10 months after the last day of the covered period, they'll start making loan payments to their PPP lender. This is a key deadline to keep in mind.

Here are the key terms for First- and Second-Draw PPP Loan Forgiveness:

If you've been affected by a disaster, you might be eligible for a disaster relief loan to help you recover. These loans can cover various types of losses, including business physical damage, economic injury, and home and personal property losses.

For another approach, see: Sba Loan Disaster Loan Application

There are four types of SBA disaster loans: Business Physical Disaster Loan, Economic Injury Disaster Loan (EIDL), Home and personal property loans, and Military Reservists Economic Injury Loans. Each type of loan has its own specific purpose and eligibility criteria.

You can apply for an SBA disaster loan in one of three ways: online, in person at a Disaster Recovery Center (DRC), or by requesting paper forms and calling the SBA contact center.

Here are the four types of SBA disaster loans and their purposes:

EIDL loans assist with operational costs, whether or not a disaster caused physical damage to a business. This type of loan is designed to help businesses cover expenses such as rent, utilities, and inventory.

You can apply for an EIDL loan in one of three ways: online, in person at a Disaster Recovery Center (DRC), or by requesting paper forms and calling the SBA contact center. The SBA contact center can be reached at 1-800-659-2955 (TTY: 711).

For COVID EIDL borrowers, the SBA offers hardship accommodation plans that can lower monthly payments to as low as $25 per month for six months, and then gradually increase over a multi-year period. You can apply for a hardship accommodation plan directly through the MySBA loan portal.

Your Targeted EIDL Advance is not taxable, which is a significant benefit for business owners.

This means you won't have to worry about paying taxes on the advance amount.

The Targeted EIDL Advance is a type of emergency funding that's available to small business owners.

You don't need to apply separately for forgiveness, as the funds are automatically forgivable as long as you use them for the approved expenses.

To keep track of how you spend the advance, it's a good idea to keep a detailed record in case the SBA has questions later on.

You'll need to provide documentation for all payroll periods that overlapped with the Covered Period. This includes showing that obligations or services existed prior to February 15, 2020.

For the first three listed obligations or services that were incurred or paid during the Covered Period, you'll need to provide evidence of these existing prior to the mentioned date.

If you're a small business owner who received a PPP or EIDL loan, you're not alone in navigating the complexities of repayment and forgiveness. The SBA has implemented a 60-day goodwill exception period for COVID EIDL and PPP borrowers with loans under $100,000, starting January 1 and lasting through March 3, 2024.

During this time, the SBA will refrain from escalating collections activities, giving borrowers a chance to get back on track. If you're unsure if your PPP loan has been forgiven, you can check by logging in to the MySBA loan portal.

For PPP borrowers, completing the forgiveness application takes most borrowers less than 15 minutes, and you can apply for forgiveness immediately if you're unsure about the status of your loan. You can also contact the SBA's dedicated forgiveness call center at 877-552-2692 for assistance.

COVID EIDL borrowers can apply for a hardship accommodation plan directly through the MySBA loan portal, which can significantly lower monthly payments to as low as $25 per month for six months.

The Small Business Administration (SBA) has announced expanded flexibility and accommodations for COVID EIDL and PPP borrowers. A 60-day goodwill exception period has been implemented for loans under $100,000, starting January 1 and lasting through March 3, 2024.

During this period, the SBA will refrain from escalating collections activities. This means that borrowers can breathe a sigh of relief and focus on getting back on track without fear of default.

Borrowers with loans under $100,000 can simply complete the PPP forgiveness application, which takes most borrowers less than 15 minutes. If you're unsure if your loan has been forgiven, you can check by logging in to the MySBA loan portal.

For PPP borrowers who need assistance with forgiveness, contact the SBA at 877-552-2692. The dedicated forgiveness call center is open Monday through Friday from 8:00 a.m. - 5:00 p.m. ET.

COVID EIDL borrowers, on the other hand, must repay their loans. However, the SBA has programs to help, including expanded hardship accommodation plans. These plans can significantly lower monthly payments - sometimes as low as $25 per month - for six months, and then payments gradually increase over a multi-year period.

To apply for a hardship accommodation plan, COVID EIDL borrowers can log in to the MySBA loan portal and follow these steps: click "Loan Summaries" in the toolbar, then "Hardship Accommodation Plan" in the bottom right corner, and finally "Learn More and Enroll."

When you're approved for a PPP loan, you'll need to follow some additional requirements to ensure you receive full forgiveness. You have your choice of between eight and 24 weeks from the first distribution of any loan amount (or June 30, 2021, whichever comes first) to spend your loan funds.

Payroll costs must make up at least 60% of the amount forgiven. This includes costs like employee salaries, wages, and benefits. Non-payroll costs, such as rent and utilities, can make up no more than 40% of the amount forgiven.

To receive full forgiveness, you must retain (or rehire) all full-time-equivalent employees according to the baseline used to establish your loan. You must do this within the covered period for your loan or by June 30, 2021, whichever comes first.

If you reduce an employee's salary or wages during the covered period, the amount forgiven will be reduced in proportion to the reduction. This only applies if the reduction is greater than 25% of the employee's average salary or wages during the base period.

If you have any ownership interest in a business, the maximum personal compensation you can count toward forgiveness is limited based on the length of the forgiveness period. This cap is not to exceed $100,000, and it applies to all companies you own.

For another approach, see: Payroll Loan Application

The IRS has ruled that any forgiven part of a PPP loan is exempt from being taxed as a "discharged debt." This means you don't have to declare the forgiven part of your loan as income when you file taxes.

The CAA further provided that ordinary and necessary business expenses paid with a forgivable PPP loan are completely deductible.

SBA disaster loans can be used to cover a wide range of expenses, including home repairs, business inventory, and equipment purchases.

There are several types of SBA disaster loans, including the Economic Injury Disaster Loan (EIDL) and the Physical Disaster Loan (PDL). The EIDL is designed to help businesses cover operating expenses during a disaster, while the PDL is used to repair or replace damaged property.

The SBA also offers the Express Bridge Loan Pilot Program, which provides quick access to loans of up to $25,000 to help small businesses meet financial obligations. This loan is designed to be repaid quickly, typically within a few months.

Loan forgiveness is available for SBA disaster loans, but there are specific requirements that must be met. Borrowers must use the loan funds for eligible expenses, and must not have any outstanding debt on the loan at the time of forgiveness.

When applying for forgiveness of your SBA disaster loan, understanding what expenses are forgivable is crucial. You'll want to use 100% of your loan for eligible expenses to ensure forgiveness.

To qualify for forgiveness, you can use your loan for salary/wages/commissions, tips, and benefits, including vacation, parental, family medical, or sick leave. This can add up to $100K per employee.

You can also use your loan for state and local taxes on compensation, utilities, rent/mortgage interest, and new operations expenses, such as business software, cloud computing services, and property damage not covered by insurance due to vandalism or looting in 2020.

New operations expenses also include supplier costs essential to operations or made pursuant to a contract in effect at the time of the PPP loan. These expenses can be a significant help for businesses struggling to stay afloat.

Additionally, you can use your loan for worker protection expenses to comply with requirements or guidance published by the Department of Health and Human Services, the Centers for Disease Control, the Occupational Safety and Health Administration, or any state equivalent from March 1, 2020, until the determination by the president of the end of the national emergency related to COVID-19.

Here are some examples of forgivable expenses:

The Shuttered Venue Operators Grant (SVOG) program is a vital lifeline for eligible venues.

The SVOG program was established under the CAA, 2021, and later amended by the American Rescue Plan Act.

Eligible applicants may qualify for up to $10 million per grant, which is 45% of their gross earned revenue.

A total of $16 billion is allocated for these grants, administered by the SBA's Office of Disaster Assistance.

$2 billion is reserved for eligible applicants with up to 50 full-time employees.

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To qualify for loan forgiveness, you'll need to provide documentation for both payroll and non-payroll expenses. For payroll expenses, you'll need to submit bank account statements or reports from third-party payroll service providers that show the cash compensation paid to employees.

Tax forms for the periods that overlap with the Covered Period are also required. These include payment receipts, canceled checks, or account statements that document employer contributions to employee health insurance and retirement plans included in the forgiveness amount.

To document non-payroll expenses, gather receipts and records for business mortgage interest payments, rent or lease payments, utility payments, and other covered costs. These may include copies of invoices, orders, or purchase orders paid, as well as receipts, canceled checks, or account statements verifying eligible payments.

Here's a breakdown of the required documentation for non-payroll expenses:

To calculate eligible payroll costs for loan forgiveness, you'll need to gather specific documents. Bank account statements or third-party payroll service provider reports are required to document the amount of cash compensation paid to employees.

These reports should include the total amount of cash compensation paid to employees during the Covered Period. You can use bank account statements or reports from third-party payroll service provider to get this information.

Tax forms or equivalent third-party payroll service provider reports are also necessary for the periods that overlap with the Covered Period. This will help you determine the total amount of cash compensation paid to employees.

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Payment receipts, canceled checks, or account statements are required to document the amount of any employer contributions to employee health insurance and retirement plans that the borrower included in the forgiveness amount.

Here are the types of documents to include in your payroll calculation:

Non-Payroll expenses can be a significant part of your business's financial picture, especially during times of crisis. To qualify for relief, you'll need to document these expenses carefully.

Business mortgage interest payments require a copy of the lender's amortization schedule and receipts verifying payments, or lender account statements. This can be a bit of a hassle, but it's worth it to get the relief you need.

Business rent or lease payments are also eligible, and you'll need a copy of the current lease agreement and receipts or canceled checks verifying eligible payments. This includes any prorated rent for the Covered Period.

Business utility payments can be claimed, with copies of invoices and receipts, canceled checks or account statements required for verification. Don't forget to keep track of these expenses, as they can add up quickly.

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Covered operations expenditures, such as supplies and equipment, require a copy of invoices, orders or purchase orders paid, and receipts, canceled checks or account statements verifying eligible payments. This can include things like masks, gloves, and sanitizer.

Covered property damage costs, like vandalism or looting, can be claimed with a copy of invoices, orders or purchase orders paid, and receipts, canceled checks or account statements verifying eligible payments. You'll also need to verify that the costs were related to uninsured property damage due to public disturbance, vandalism, or looting that occurred in 2020.

Covered supplier costs, including contracts and purchase orders, require a copy of contracts, orders, or purchase orders in effect at any time before the Covered Period, and copy of invoices, orders, or purchase orders paid, and receipts, canceled checks, or account statements verifying eligible payments. This can include non-perishable goods and supplies.

Covered worker protection expenditures, like personal protective equipment, require a copy of invoices, orders or purchase orders paid, and receipts, canceled checks or account statements verifying eligible payments, and verification that expenditures were used to comply with COVID-19 guidance.

Here's a quick rundown of the required documentation for Non-Payroll expenses: