Get Your Financials Together for Loan Forgiveness or Payment

Millions of Americans took advantage of the Paycheck Protection Program (PPP) and the SBA’s Economic Injury Disaster Loan (EIDL) program in 2020 and 2021 during the COVID-19 pandemic. These financial lifesavers helped keep businesses afloat but as with all loan programs, they come at a price. Make sure you are planning financially to repay your loans without tanking your cash flow. Review your company’s cash flow and income/expense reports now and plan for loan repayment!

Here are timely reminders:

PPP loan forgiveness

If you received PPP money during last year’s second draw (which ended May 31, 2021), it’s time to prepare for your loan forgiveness application. The deadline is based on when you originally applied for the loan and when it was funded. You must apply within 10 months of the last day of the covered period of your loan; otherwise, you will begin to make loan payments to the lending institution that funded the loan. There is no guarantee that all or some of your PPP loan will be forgiven, so be prepared for loan repayment.

Applications with your supportive detail about how the money was spent are submitted to the lender. The deadlines are firm so don’t delay! You can read all about it on the SBA website.

EIDL loan repayment

Unlike PPP money, the EIDL program is a loan through the SBA that must be repaid (this does not include the one-time $1000 per employee EIDG). The loans have favorable terms—low interest rate and a 30-year amortization—which made them very appealing to business owners.

Loans received a total 2-year deferment (interest still accrues) for repayment. Payments of principal and interest are to be made over the remaining 28 years.  It’s time to address your EIDL payback and set up your payment schedule. Loan payments for many borrowers start in April. You can set up electronic payments here.

Existing borrowers can monitor their loan status by creating an account in the SBA Capital Access Financial System (CAFS).

Secondary loan alert

If your loan amount was over $25,000, you must get approval from the IRS to subordinate the loan if you go for other financing. The IRS has first lien on your loan collateral (receivables and assets); give yourself ample time to notify the IRS about your need to apply for another business loan and get approval for the additional financing.

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