They keep changing the rules – these are the latest

Updated September 2020

Back when PPP (Paycheck Protection Program) loans first came out, there was a ton of confusion… and there still is.

The rules have changed a bunch of times, and there’s legislation floating around right now that might change them again.

But as of right now, here’s what’s going on with PPP loans.

You can apply for a PPP loan through August 8, 2020

When Congress realized that most small business owners hadn’t applied for or gotten PPP funds, they extended the application deadline.

There are still funds available, and a couple of weeks left to get your share.

If you had business income in 2019 and your income dropped off due to COVID-19, apply for a PPP loan right away. Earnings from these sources count as business income:

  • a small business
  • self-employed
  • freelance
  • consulting
  • side gig (unless you receive a regular paycheck with taxes taken out)

If you had 1099 income in 2019, you qualify for this money. The most you can get (being self-employed with no other employees) is $20,833.

To get your loan application started, contact your business bank (if you don’t have one, open a business checking account ASAP). If they can’t or won’t offer the loan, try your personal bank. You can also try online sources, including:

If you don’t have a business checking account, open one before you receive your PPP loan funds. If you do, make sure to clearly track where the PPP money goes.

Rules for loan forgiveness

The best part of PPP loans: forgiveness. That means you don’t have to pay the money back (at least not all of it).

Here are the most recent rules about PPP loan forgiveness:

  • You have to use at least 60% of the funds on payroll, and payroll includes paying yourself if you’re self-employed
  • You have 24 weeks to use up your PPP loan funds
  • If you had employees that you had to lay off or furlough due to COVID, you have until 12/31/2020 to hire them back
  • If you can show that you were unable to hire back employees or that your business hasn’t recovered from COVID, you may still get loan forgiveness if you spend less than 60% on payroll

If any of your PPP loan does not get forgiven, you have 5 years to pay it back at 1% interest. That’s a pretty good deal.

Applying for PPP loan forgiveness

To qualify for PPP loan forgiveness, you have to ask for it. To do that, you need to fill out forms.

The old forms made me want to scream. The new ones are better.

The new simplified forgiveness application uses updated SBA Form 3508.

Self-employed people who don’t have any employees and certain small business owners with employees can use an even easier form called SBA Form 3508EZ.

But I’d hold off on filling out those forms…

New legislation is underway that might change the whole forgiveness picture – if it passes (and I think it will). Nutshell: If a business got a PPP loan of $150,000 or less, they’ll get automatic forgiveness by submitting an attestation form. This one page statement basically says that you followed the PPP loan rules and that you’re eligible for forgiveness.

But that still hasn’t – and may not – happen. So here’s a free online tool you can use to get all your ducks in a row and be ready when your lender starts accepting applications. This free (did I mention free?) online PPP Loan Forgiveness tool will also help you figure out how much of your loan qualifies for forgiveness.

Stay tuned…