From a business perspective, there are many benefits associated with applying for an SBA Loan. After all, they often provide business owners with the financial backing they need to grow and scale their companies while also benefiting from long repayment terms and low interest rates.

However, things can get complicated when business owners are unable to pay back these loans. While there are many ways in which you can work to repay the money owed, there are some circumstances in which you can apply for SBA Loan Forgiveness. 

Can SBA Loans Be Forgiven?

Generally speaking, SBA Loans can be forgiven, though it depends on the type of loan, and the circumstances you find yourself in. As such, the answer to this question can vary on a case-by-case basis. 

Understanding SBA Loan Forgiveness

What exactly is loan forgiveness?

As the name indicates, loan forgiveness means that the recipient of the loan is “forgiven” and, therefore, is not expected to pay back the money owed to the lender. In some cases, loans may be partially forgiven, meaning the recipient only has to pay back a percentage of the original loan amount.

However, specific requirements must be met in order to qualify for loan forgiveness. 

PPP Loan Forgiveness.

Loans obtained through the Payment Protection Program (launched during the pandemic) were designed to help support businesses during turbulent times. Depending upon how these funds were used/spent, you may be eligible for complete or partial forgiveness for any PPP loans you obtained during this time. According to a recent study, “92% of the loans issued have been granted full or partial forgiveness.” 

SBA 7a Loan Forgiveness.

It is very rare for SBA 7a loans to be forgiven in their entirety, though the U.S. Small Business Association has introduced numerous SBA debt relief plans in the wake of the COVID-19 pandemic.

For example, if your business closed down, therefore making low repayment near-impossible, you may be able to obtain an Offer in Compromise. This reduces the amount of money you’ll have to repay, though the exact amount varies depending on the loan size and your current financial situation. 

How to Get SBA Loan Forgiven: Steps and Tips

If you are looking to get your SBA Loan Forgiven, you may find the following steps useful! 

Determine your eligibility. Before you begin the process of applying for loan forgiveness, it's important that you first determine your eligibility for the relevant forgiveness schemes. 

Have the right paperwork to hand. Whether you’re reaching out to the lender directly or looking into various debt forgiveness schemes, it's important that you have the right information to support your claim. Generally speaking, you should gather any financial statements, loan applications, and evidence of business closure to support your application. The more evidence you have, the higher the chances are of obtaining loan forgiveness, as you’re able to back up your requests or the claims you are making.

Apply for PPP forgiveness online. In order to accommodate the vast number of business owners applying for PPP forgiveness, the U.S. Small Business Association has established an online portal to process applications. This means that you can quickly and easily apply for loan forgiveness online in as little as fifteen minutes. However, you will need to fill out different forms depending on the amount of money borrowed. For example, those looking for forgiveness for loans of less than $150,000 should fill out the PPP 3508S Loan Forgiveness Application.

Final Thoughts.

In short, there are many different avenues to pursue for those looking to pursue SBA Loan forgiveness, whether they’re considering making an Offer in Compromise to a lender or applying for PPP forgiveness. Either way, it's important that you do plenty of research ahead of time to ensure this is the best possible solution for you (and your business). 

For example, it may instead be worthwhile to negotiate a repayment plan with the lender as opposed to seeking to get the debt absolved. Either way, knowing your options ahead of time will help you to make the best possible decision, which can, in turn, make it easier for you to apply for business loans in the future.

Need a Small Business Loan? Contact Us.

If you’d like to find out more about small business loans, please do not hesitate to get in touch today. With years of experience, we’re on hand to help you get your business back on the path to financial success!