13 Sep 23

Will the SBA loans be forgiven?

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Last Updated on: 2nd October 2023, 02:59 pm

Will My SBA Loan Be Forgiven?

With the economy in the dumps, lots of folks are hoping they can get their Small Business Administration (SBA) loans forgiven. Who wouldn’t want a clean slate on their business debt? But sorry to say, SBA loans don’t just go “poof” and disappear. You gotta repay them.

Most SBA Loans Aren’t Designed to Be Forgiven

When you take out money from the SBA, you sign a contract to pay it back with interest. The SBA is lending you real cash, not giving you a gift. So you can’t expect loan forgiveness as part of the deal. Their standard 7(a), 504 and microloans need to be repaid.

But the PPP Loans Are Different

The Paycheck Protection Program (PPP) loans that became available during COVID are special. Congress created these to quickly get cash to small businesses to cover payroll and expenses during shutdowns.

And the cool part is PPP loans can be forgiven if you use the money correctly. You gotta spend it on payroll, rent, utilities and other approved costs. Do that, and the SBA will forgive the full loan amount. It’s the only major SBA loan program where that happens.

You Have to Apply for PPP Loan Forgiveness

Forgiveness doesn’t happen automatically though. You need to submit an application to the SBA showing how you spent the loan funds. And you must apply within 10 months of the last day of your loan’s covered period.

The lender will review your app and decide how much to forgive. It ain’t always the full amount. The SBA has rules on how much needs to be spent on payroll versus other expenses. So read up on the requirements.

Other Special Loans May Offer Some Forgiveness

Besides PPP loans, the SBA sometimes offers debt relief after major disasters like hurricanes, floods or big economic downturns. These programs are targeted to the hardest hit areas though.

The SBA also settles some defaulted loans for less than the full balance. That indirectly provides some forgiveness, although your credit still takes a big hit.

Bottom line is that standard SBA loans are loans, meaning you gotta pay up. PPP loans are the only major exception if you spend ’em right. Don’t bank on full forgiveness for other SBA financing.


U.S. Small Business Administration, “Paycheck Protection Program Loan Forgiveness”