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3 Reasons Why Business Owners Don’t Apply for PPP Loan Forgiveness

Oct 29, 2021 • 8 min read
apply for PPP loan forgiveness paycheck protection program
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      UPDATE: The PPP loan application period ended May 31, 2021. Learn about financing options available for small businesses today at

      For many small business owners, the pandemic’s onset represented the first time outside financing may have become needed to stay afloat. Scrambling to retain key staff and remain functional amidst lockdown requirements and the threat of illness, this new—and frightening—territory arrived alongside unprecedented financial concerns: how do you pay employees when you have to close down, decrease output, or increase physical distancing? 

      Enter the Paycheck Protection Program (PPP): a loan program backed by the US Small Business Association (SBA) intended to help businesses keep their staff employed during the COVID-19 crisis. To date, PPP has provided businesses with more than 11 million loans totaling nearly $800 billion. If you’re one of the millions of small businesses who accessed PPP loans (whose application period closed in May 2021), it’s now time to begin contemplating some crucial—and, admittedly, confusing—next steps to qualify for forgiveness. 

      How do small businesses get forgiven for a PPP loan, and what should you do if you need more small business financing to keep on trucking? We’ve got some tips and suggestions for you below.

      Why Don’t Some Small Businesses Apply for PPP Loan Forgiveness?

      Luckily for those of us pondering this question, Lendio’s cofounder and CEO Brock Blake recently shared his thoughts on PPP loan forgiveness in an interview with For some small business owners, Blake says, confusion or stress around the forgiveness process drives their decision not to apply (or apply yet) for forgiveness. For others, the low interest on the loan—just 1%—means that retaining the loan could result in some savings at tax time. And variability in the size of your PPP loan also connects to the amount of forgiveness paperwork awaiting you at application time. But there are other reasons, too.

      Applying for PPP Loan Forgiveness Can Be Stressful

      You’re already juggling so much paperwork as a small business owner—so it’s not surprising that many folks find the additional work of applying for PPP forgiveness stressful or unclear. “People are confused at how exactly to do it,” Blake states. 

      This apprehension extends not only to borrowers, but to lenders as well: “[Lenders] may not have the expertise to provide the support that’s needed to give business owners the attention and guidance that they need, so they’re not proactively reaching out saying here’s how you apply, here’s the documentation you need,” says Blake. As PPP loans represent an unprecedented response to an unprecedented pandemic, it’s no surprise that businesses and lenders alike face uncertainty through the various steps of the process.

      Lendio has collected key information for borrowers seeking loan forgiveness. You can access it here. 

      Possible Tax Benefits of PPP Loans 

      Another confusing area of PPP loan forgiveness are the loans’ potential impact at tax time. While the IRS and Congress decided that forgiven PPP loans would not be taxed by the federal government, states can still consider a forgiven loan as taxable income—and some do. Making sure you know the guidelines of your business’s home state will help tremendously in navigating the loan’s effect over time.

      Speaking of taxes: some small businesses are choosing not to apply for PPP loan forgiveness based on the benefits of its loan status on Tax Day. Borrowers “have 10 months,” says Blake, “from the time the borrowers covered period ends to apply for forgiveness or they’ll need to start making payments. [Some] may just prefer to take the 1% interest as a tax write-off over the five years.”

      Which approach is right for your business? While we hope the above information gets you started in asking the right questions, make sure to consult with your accountant and local laws about the nitty-gritty relevant to your situation. They’ll have the most specifically tailored advice you need to move forward.

      Amount of Forgiveness Paperwork Varies by PPP Loan Size

      Will your PPP loan forgiveness paperwork take you minutes or hours—or more—to complete? It depends on the size of your loan, Blake says. Borrowers who took out $150,000 or less face a “super simple” process: “you just have to attest that you used the money for what you said you would.” 

      For those who borrowed more than $150,000, the process becomes a bit more elaborate—but not impossible. The paperwork for larger borrowers will need to include itemized expenses, according to Blake. This increased accountability, he says, is of paramount importance: “We don’t want business owners to be using taxpayer dollars fraudulently. We want some accountability there, to make sure that money was put to good use.”

      What’s the best way to make sure that your paperwork is done correctly? Simple, says Blake: “work with a tax accountant or another financial professional.”

      How to Apply for PPP Loan Forgiveness

      Once you’ve determined that applying for PPP loan forgiveness is right for your small business and you’re nearing the 10-month window from receipt of the loan, it’s time to get started on your application. The SBA outlines on their website how and when to apply, making it a great first stop in the process.

      Blake offers some additional insights as well: “the first place I’d start,” he says, “is directly with the lender. We have 25 lenders who have contracted with Lendio and when the borrower reaches out to the lender, they direct them to our team. Our team on behalf of the lender helps walk the borrower through the process.” While some small businesses may be able to work directly with the SBA, he notes, most will need to begin with their lender—Lendio or otherwise—to initiate the paperwork.

      What Other Kinds of Outside Funding Are Available?

      If a PPP loan was your business’s first foray into outside funding, you may be looking for more opportunities to help grow your business, especially as reopening continues across the US. 

      Curious to learn more about funding options for your small business? Lendio has numerous resources for you to get started. Click to learn more about a business line of credit—funding that can be used flexibly towards nearly any business expense, making it a great option—equipment financing, among so many other choices. 

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      Disclaimer: The information provided in this post does not, and is not intended to, constitute business, legal, tax, or accounting advice. All information, content, and materials available in this post are for general informational purposes only. Readers of this post should contact their attorney, business advisor, or tax advisor to obtain advice with respect to any particular matter.
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