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Please note: The SBA Paycheck Protection Program and Economic Injury Disaster Loan Advance Grant Program are both closed to new applications. General information on the programs and the forgiveness process for each can be found in this FAQ page.
NAR has been working closely with Congress and the Administration to ensure the interests of REALTORS® and their clients are protected in any federal action in response to COVID-19. Many REALTORS® are small businesses, or work with them as clients. In the first relief package passed into law in April 2020, the "Coronavirus Aid, Relief, and Economic Security Act" or CARES Act, there were significant provisions aimed at assisting small businesses during this difficult time. The CARES Act created two new Small Business Administration (SBA) programs - the 7(a) Paycheck Protection Program (PPP) loans and the Economic Injury Disaster Loans (EIDL) advance grants program, which have since had multiple rounds of appropriations, most recently in the December 2020 COVID-19 relief package and the American Rescue Plan, passed in March 2021.
The PPP loans and the EIDL advance grants evolved from their creation in the spring 2020, reflecting the ongoing economic challenges presented by the COVID-19 pandemic and the need for greater flexibility for the small businesses participating in the programs. This FAQ provides the most up-to-date information on both programs, their requirements, and how borrowers can achieve forgiveness.
The December 21, 2020 COVID-19 relief bill made some major changes to PPP, including a streamlined forgiveness process for borrowers of less than $150,000 in loans; allowing some hardest-hit small businesses access to second-draw PPP loans; giving certain 501(c)(6) organizations access to the program; and correcting an IRS ruling to allow for business expenses paid for with PPP loan money that is later forgiven to be tax-deductible. This FAQ reflects the current, most up-to-date rules for the programs.
What is the SBA 7(a) Paycheck Protection Program?
1. What relief can small businesses get through the SBA 7(a) Paycheck Protection Program?
The SBA 7(a) Paycheck Protection Program loans (PPP loans) are intended to cover expenses for a business during any 8 (if received before June 5, 2020) or 24-week period between February 15, 2020 and September 30, 2021.They can be used for payroll costs, rents, mortgage interest, and utilities; the December 2020 COVID-19 relief bill also expanded the allowable uses to include expenses related to purchasing Personal Protective Equipment (PPE) for the business and damages related to civil unrest or protests
Businesses were eligible to receive the lesser of either 2.5x the average monthly payroll expenses they had for the year prior to the loan or $10 million dollars for their first PPP draw. When calculating payroll expenses, individual employee salaries were capped at $100,000 (prorated per month). Beginning March 3 2021, due to changes made by the Biden Administration. Independent contractors, sole proprietors, and the self-employed (“Schedule C filers”) could opt to use either their net profits or their gross income to determine their “payroll costs.”
2. What is included in “payroll expenses” for purposes of the 7(a) PPP loans?
Payroll expenses under the CARES Act are the sum of:
- Salary, wage, or commission;
- Cash tips;
- Payment for leave;
- Dismissal or separation allowances;
- Group health care benefits payments (including insurance premiums);
- Retirement benefit payments;
- State or local tax on the compensation of employees;
- The income of a sole proprietor or independent contractor that is a wage, commission, income, net earnings from self-employment, or similar compensation.
Payroll expenses under the CARES Act do not include:
- Taxes withheld by the IRS under Chapters 21, 22, or 24;
- Compensation to employees who live outside of the U.S.; or
- Sick leave/wages for which they’ve already received a credit under the Families First Coronavirus Response Act.
3. I’m an independent contractor/sole proprietor/self-employed, and file my taxes using IRS Form 1040, Schedule C. How do I calculate my maximum loan amount?
In March 2021, the Biden Administration announced changes to the way “Schedule C filers” could calculate their total loan amount, based on concerns that the payroll cost method – which for these filers was based on their net profit, subtracting business expenses – disadvantaged them. Under the new system, these borrowers were eligible to use either their net profit or their gross income.
An updated interim rule was released, as well as a new application form for Schedule C filers using gross income to calculate loan amount to use.
Unfortunately, these changes did not apply retroactively, so existing PPP borrowers who may have qualified for the updated calculation method were not eligible to apply for the difference in their loan amounts based on the new guidelines.
4. Are there loan fees for the SBA 7(a) PPP loan?
No. The SBA is waiving ordinary application fees for the 7(a) PPP loans.
5. Is any portion of the SBA 7(a) loan forgivable?
Yes, up to 100% of the 7(a) PPP loans are forgivable. Small businesses with employees and independent contractors have different forgiveness specifications though.
Small businesses with employees must put the loan money toward an eligible use, with at least 60% of the total amount going toward payroll costs, and keep the same number of employees on staff. If the percentage of the loan used for payroll costs is less than 60%, or if the number of employees is reduced/salary levels are reduced by more than 25%, the amount of the loan eligible for forgiveness is lowered. However – there is an exception: you will not be penalized for a reduction in employee numbers, if you restored employee numbers by December 31, 2020.
The U.S. Chamber of Commerce put together a helpful guide for small businesses, which includes the calculation businesses can do to determine their loan amounts and forgiveness eligibility under the program.
Eligible uses for a 7(a) PPP loan are:
- Payroll costs;
- Continuation of group health care benefits;
- Employee salaries, commissions, or “similar compensations”;
- Payments of interest on any mortgage obligation;
- Interest on any other debt obligations that were incurred before the covered period (beginning February 15, 2020).
- PPE Expenses;
- Covered property damage costs; and
- Covered supplier costs.
Independent contractors, sole proprietors and the self-employed with no employees are eligible to have their entire PPP loan forgiven as “owner compensation replacement” under the 24-week covered period.
Please visit, the SBA PPP Loan Forgiveness “Explainer” page for additional information.
6. Will I be taxed on expenses paid for with forgiven PPP loans?
No, due to a correction made in the December 21, 2020 COVID-19 relief bill. Congress made clear in the CARES Act its intent for tax-free treatment of any forgiven PPP loan amount, but the IRS then issued Notice 2020-32, contradicting that intent by effectively making the tax-free loan forgiveness into taxable income. This could result in small businesses having to pay up to 37% in taxes on their forgiven PPP loans – an unexpected expense that many small businesses cannot cover.
NAR strongly advocated for Congress to correct this misinterpretation, and the December 21 COVID-19 relief bill explicitly allows for tax-deductibility of business expenses paid for with forgiven PPP loans.
7. What if a portion of my 7(a) PPP loan is not eligible for forgiveness?
SBA 7(a) PPP borrowers whose loans are not eligible for 100% forgiveness have two years (if the loan was made prior to June 5, 2020) or five years (if the loan was made after June 5, 2020) to repay the loan, at an interest rate of 1%. Borrowers that received loans before June 5 can request the longer repayment period from their lenders, but it is not applied automatically. The remaining loan balance after forgiveness is 100% guaranteed by the SBA.
8. Will forgiven loan amounts be counted as income for tax purposes?
No. Any forgiven loan amounts under the SBA 7(a) PPP program will not count as income.
9. What documentation will I be required to provide to qualify for forgiveness?
The SBA and the Treasury have released three forgiveness application forms:
Form 3508S Forgiveness Application: This is a streamlined, 1.5 page application for borrowers that:
- Have a total PPP loan amount of $150,000 or less.
This application requires fewer calculations and less documentation for eligible borrowers. They must provide their loan information – amount, loan number, employee numbers at the time of application and at the time of applying for forgiveness, and the amount of the loan spent on payroll costs – and self-certify that they met the program requirements. These borrowers should still retain any documentation backing up their application in case they are audited by the SBA.EZ Forgiveness Application: This is a streamlined application for borrowers that:
- Are self-employed and have no employees; OR
- Did not reduce the salaries or wages of their employees by more than 25%, and did not reduce the number or hours of their employees; OR
- Experienced reductions in business activity as a result of health directives related to COVID-19, and did not reduce the salaries or wages of their employees by more than 25%.
The application requires fewer calculations and less documentation for eligible borrowers, and includes instructions for filling it out. Independent contractors with no employees are eligible to have the full amount of their PPP loans automatically forgiven in owner-compensation (up to $20,833 based on the max $100,000 in net earnings or gross income from 2019) if they opt for the 24-week covered period under the new application form.
View NAR's instructional video for completing the EZ Forgiveness Form.
Full Forgiveness Application Form 3508: This is the application form for all other PPP borrowers. It has four components: (1) the PPP Loan Forgiveness Calculation Form; (2) the PPP Schedule A; (3) the PPP Schedule A worksheet; and (4) the (optional) PPP Borrower Demographic Information Form. All borrowers must submit the PPP Loan Forgiveness Calculation Form and the PPP Schedule A to their lenders.
The full forgiveness form includes instructions for borrowers, and is updated to reflect the changes in forgiveness requirements made by the PPP Flexibility Act on June 5, 2020 (importantly, the longer covered period of 24-weeks for new loans and the 60% payroll requirement).
Note: On July 28, 2021, the SBA announced the launch of a new, streamlined forgiveness application portal for loans of $150K or less, which began accepting applications on August 4, 2021. This application portal is available to independent contractors and sole proprietors to use. The portal does require that the individual lenders opt-in to the program, which they can do at https://directforgiveness.sba.gov/requests/borrower/login/?next=/%3Futm_medium%3Demail%26utm_source%3Dgovdelivery.
10. Will I be audited by the SBA/Treasury before qualifying for forgiveness?
If you receive a PPP loan of $2 million or more, yes; the Treasury Department announced in April 2020 that PPP loans of that size will be subject to auditing upon submission of an application for loan forgiveness. Further details on the audit process are forthcoming.
On May 13, 2020, the Treasury Department released updated guidance clarifying that smaller loans of less than $2 million will not face the same heightened scrutiny when applying for forgiveness. It states that such borrowers will be deemed to have made the required good faith certification that such a loan was necessary. The agencies still have the ability to conduct audits on smaller loans though, so borrowers should be careful to retain all the proper records and report correct information on their forgiveness applications.
11. Will my loan information be publicly available?
The SBA and Treasury have made PPP loan and borrower information available to the public. For loans at or below $150,000, the agencies released data by state omitting the name of the borrower but showing the amount of the loan, the NAICS code for the borrower, and the number of jobs retained due to the loan. For loans above $150,000, the business is named, and the range of the loan (e.g., $2-5 million) is included. For additional information, please visit the Treasury Department's SBA Paycheck Protection Program Loan Level Data page.
Please visit the SBA's PPP data page, which features compiled data on PPP borrowers and the voluntary borrower demographic information.
12. Could a businesses get more than one PPP loan?
Yes. In the December 2020 COVID-19 relief bill, certain small businesses were made eligible for a second-draw PPP loan of up to $2 million. The requirements to get a second PPP loan were:
- 300 or fewer employees;
- A reduction in gross receipts of at least 25% in a quarter of 2020 compared to the same quarter in 2019; and
- The business will not receive more than $10 million in PPP loans within 90 days.
13. What if I need more information or assistance?
The SBA increased its customer service team to answer questions and directly assist borrowers with their forgiveness applications. Borrowers that need assistance or have questions should call (877) 552-2692, Monday – Friday, 8 AM to 8 PM EST.
14. Where can I get individual counseling on SBA loans and programs for small businesses?
The SBA has several options for in-person assistance to small businesses around the country. In addition to the SBA Regional and District Offices around the country, there is a network of Small Business Development Centers and Women’s Business Centers, which provide counseling and training to small business owners, including assistance finding lenders and choosing the right loan products. Find information on the SBA’s local assistance offerings at https://www.sba.gov/local-assistance.
15. Where can I find more information about the 7(a) PPP loan program?
Who was eligible for the SBA 7(a) Paycheck Protection Program?
1. Who was eligible for a PPP loan?
Small businesses that meet current SBA requirements, any business with 500 or fewer employees, sole proprietors, independent contractors, the self-employed, and “gig economy” workers qualified for the 7(a) PPP loans.
2. Were independent contractors eligible to receive a PPP loan?
Yes, sole proprietors and independent contractors were eligible for the SBA 7(a) PPP loan program. They had to provide documentation to prove eligibility, including payroll tax filings to the IRS, a 2019 IRS Form 1040 Schedule C, Forms 1099-MISC, and income and expenses from the sole proprietorship. They also need to supply their lender with documentation that they were in operation on or before February 15, 2020 – such as a bank statement, 2020 invoice, or book of record.
As of March 3, 2021, independent contractors, sole proprietors, and self-employed business owners who file an IRS Form Schedule C 1040 were eligible to calculate their loan amounts based on either net profit or gross income.
3. I am an employer who has full-time, salaried employees, as well as independent contractors working for me. Should I have included the independent contractors in my headcount/payroll expenses?
No. On April 2, 2020 the SBA released its interim final rule on the SBA 7(a) PPP loans. The rule clarifies that because independent contractors can apply for their own loans under the program (beginning April 10, 2020), they should not be included in the payroll or employee count calculations of other businesses.
4. Are franchises considered “small businesses”?
Franchises with 500 or fewer employees are eligible for the PPP loans. Franchises that are assigned codes in the SBA’S Franchise Directory are considered their own entity – so, those businesses will not need to combine employee numbers across all franchise locations.
5. How do you calculate employee count if you have multiple office locations?
Under the CARES Act, businesses with multiple physical locations that fall under the category of a hotel, restaurant, or bar covered by NAICS Code 72 (“Accommodations and Food Services”) which has 500 or fewer employees per physical location may qualify for the SBA 7(a) loan program. However, if a single location has more than 500 employees than you may not qualify.
6. Are 501(c)(6) organizations eligible for PPP loans?
Initially 501(c)(6) organizations were not eligible to apply for PPP loans. NAR advocated for these organizations to have access to the program since the Spring, and were successful in the December 21 COVID-19 relief bill at getting that changed. Under the new rules, 501(c)(6) organizations were eligible for PPP loans if they met the following requirements:
- 300 or fewer employees;
- Less than 15% of gross receipts come from lobbying activities (federal, state, and local);
- Less than 15% of total activities of the organization are lobbying activities (federal, state, and local); and
- The organization spent less than $1 million on lobbying activities in the tax year ending on February 15, 2020.
Additionally, PPP loans cannot be used for lobbying expenses of any kind.
What is an SBA Economic Injury Disaster Loan (EIDL) and EIDL Advance Grant?
1. What is an SBA EIDL loan and advance grant?
SBA Economic Injury Disaster Loans (EIDLs) are low-interest loans for small business that experience an economic hardship as the result of a declared disaster.
SBA EIDL loans are available for small businesses during a declared disaster that have suffered economic harm. The COVID-19 crisis was declared an eligible disaster. The limit on these loans was initially $150,000 until April 6, 2021 when the limit was raised to $500,000.
The EIDL advance grants were a new feature of the EIDL program. Under the CARES Act, applicants could receive up to $10,000 advance on their EIDL loan, which disbursed ahead of the full amount and is eligible for forgiveness. EIDL loans can be used to provide paid sick leave to employees unable to work due to COVID-19, maintaining payroll, meeting increased costs due to supply chain disruptions, rent or mortgage payments, and repaying debt obligations.
The December 2020 COVID-19 relief package included an additional $20 billion in funds for EIDL advance grants, and the American Rescue Plan appropriates an additional $20 billion in funding, but also made changes to applicability, making only small businesses with 10 or fewer employees which suffered an economic loss of at least 50% due to COVID-19 eligible to apply for a new grant. Businesses that already applied for and received an EIDL advance grant that were eligible to receive a higher amount of funding were notified by the SBA.
Unlike other disaster loan programs, they did not require physical damage to a business.
In order to meet the high demand for EIDLs, the SBA announced in April 2020 that it was capping the loans at $150,000 per business, and that the advance grants would be $1,000 per employee, with a maximum amount of $10,000. The SBA later announced “targeted” EIDL funding, with $10 billion for businesses that did not receive the full EIDL advance grant that they were eligible for (up to the full $10,000), and $5 billion appropriated for grants to small businesses with 10 or fewer employees that suffered an economic loss of greater than 50% due to COVID (up to $5,000/business).
2. Who was eligible for an EIDL?
Under the CARES Act, an EIDL was available to any small business or business with 500 or fewer employees (or an industry size standard above 500 set by the Administration) that experienced an economic hardship as a result of COVID-19. This included sole proprietors, independent contractors, tribal businesses, and cooperatives.
A business was required to make a good-faith certification that it is suffering an economic injury due to the COVID-19 crisis.
The EIDL targeted advance grant was only available for small businesses with 10 or fewer employees who suffered an economic loss of at least 50% due to COVID-19.
3. How much could a business receive from an EIDL?
Before April 6, 2021, eligible small businesses could receive up to $15,000 in unsecured EIDLs, based on their working capital needs (secured loans may be for higher amounts). Unsecured EIDLs and the advance grants could be combined for a maximum total of $25,000; the maximum loan amount for EIDLs (if secured) was $150,000.
Beginning April 6, 2021 the agency raised the loan limit for the COVID-19 EIDL from 6-months of economic injury with a maximum loan amount of $150,000 to up to 24-months of economic injury with a maximum loan amount of $500,000. Businesses that received a loan subject to the $150,000 limit did not need to submit a request for an increase at this time; the SBA reached out directly via email to provide more details about how they could request an increase.
Under the new rules governing the EIDL targeted advance grant program, only small businesses with 10 or fewer employees that suffered a loss of at least 50% due to COVID-19 were eligible to apply for a new EIDL grant, which for those borrowers was up to $5000.
Read the SBA Announcement of the Changes to the EIDL Limit (March 24, 2021)
4. Is any portion of an EIDL forgiven?
Yes. The EIDL advance grant amounts are eligible for forgiveness if the borrower spends them on:
- Paid leave;
- Maintaining payroll;
- Mortgage or rent payments;
- Repaying debt obligations that the business is unable to meet due to revenue loss; and
- Increased costs due to supply chain disruption.
5. How do I apply to have my EIDL advance grant forgiven?
Because the EIDL targeted advance is a grant, if a business qualified for it there is no need to then submit an application for forgiveness. Unlike PPP loans, EIDLs are not tied to an 8-week timeline, nor do they have requirements that a percentage of the funds go to any one use over another. Borrowers who receive an EIDL advance grant should keep clear records showing that they went toward one of the eligible uses (see #3 above) and be prepared to provide them to the SBA if requested.
6. What are the terms for the portion of an EIDL that is not eligible for forgiveness?
EIDL terms are for 30 years, and interest rates are capped at 3.75% for small businesses (2.75% for non-profits). The first month’s payments are deferred a full year from the date of the promissory note.
The CARES Act made additional provisions to assist borrowers who are utilizing EIDLs due to the COVID-19 crisis:
- EIDLs could be approved by the SBA based on an applicant’s credit score alone;
- Loans less than $200,000 were not required to have a personal guarantee;
- They did not require real estate as collateral, and accepted a general security interest in business property.