With the end of the Paycheck Protection Program on May 31, 2021, a number of small business owners have been asking and thinking about other U. S. Small Business Administration (SBA) loan programs, and it is perhaps a propitious moment to remember why SBA loans are so attractive to small business owners, how they reduce lender risk, and why that is beneficial for a loan applicant.   

Generally speaking, SBA-guaranteed loans are attractive to small business owners because they have longer terms and lower down payment requirements than conventional loan products.  Further, SBA-guaranteed loans have capped interest rates and no balloon payments.  The loans are made through a private lender and then guaranteed by the SBA.  That guarantee lowers the lender’s risk which allows them to approve borrowers where they may not have been able to extend credit otherwise.  

Small, for-profit businesses are eligible for an SBA-guaranteed loan.  Each lending scenario rests on its own merit and the lender’s criteria for extending credit.  Just as with any conventional loan product, SBA participating lenders evaluate the borrower’s ability to repay the loan.  The credit score is a key indicator of the borrower’s credit history.  A low score would be a weakness while a high score would be a strength.  It’s important to keep in mind that you have the option to “shop” lenders and find loan terms that best benefit your business.  Along that same line, even if one lender declines the loan, another lender could approve it.  SBA works with a large network of lenders and so business owners have many options, to include large traditional banks, regional banks, and smaller community-based lenders.  Your local SBA District Office can provide you with a list of participating lenders in your area. You can also use SBA’s on-line lender matching tool to connect with SBA-approved community development financial institutions (CDFI) and small lenders from all over the country at. Many business owners find it helpful to meet with a business advisor from one of SBA’s business counseling resource partner organizations as they research their financing options.  You can find a business advisor near you by using our locator tool at.  These partner advisors can assist the businesses owner in any aspect related to applying for financing, be it identifying lenders, preparing a strong loan package or even building or repairing credit if that is a concern.  As our partners, these advisors offer their services at low or no cost and are a great resource to any business owner looking to start or grow their business.  

The application process is managed by the participant lender from start to finish.  The exact paperwork and forms required is determined by the lender.  Generally speaking, most lenders will ask for your business plan, tax returns and financial statements (or financial projections for a new company).  Advisors with our SBA small business counseling partners, the SCORE Association, the Small Business Development Center or a Women’s Business Center, can assist with preparing these documents and the loan package.  These services are free of charge. 

A question often asked by a potential borrower is “how long does the process of applying for an SBA loan take” or “what is the average wait time before applicants receive funding after the approval?”  The easy answer is that it depends on what authority the bank has with SBA and whether they process a loan using their delegated authority.  If they use delegated authority, they generally receive the SBA approval instantly.  While there is no guaranteed timeline, generally speaking, borrowers report completing the full process anywhere from two weeks to one month.  Quicker processing time usually occurs when a lender is an SBA-preferred lender and that is why there is an advantage to working with them.  When a lender has Preferred Lender status, the lender has authority granted by SBA to make final credit decisions on SBA-guaranteed loans.  Non-preferred lenders must submit the loans directly to the SBA for approval, which may make the process longer and can potentially be a timing issue.  

Borrowers also often want to know the most common reason an SBA loan application is rejected.  Many times, it is because of insufficient or incomplete application information or issues of character, such as a criminal record or bankruptcy.  It is important to remember that even with the SBA guarantee, the lender may require the borrower to provide a down payment or additional collateral because the SBA guarantee does not eliminate risk, it merely reduces it.  The exact terms of what is required is based on the overall risk of the transaction.  Always remember that personal guarantees also apply, and the borrower does have an obligation for repayment.  

To learn more about how SBA loans can benefit your small business, please join us for our monthly SBA Arizona Virtual Loan Clinic, next offered on Wednesday, August 4^th at 9am.  We will discuss financing options, general loan requirements and tips for preparing a successful loan application.  No registration is necessary.  Webinar log-in information is at   

In addition to our website, please follow us on Twitter and view our Resource Guide at for further information. 

Robert J. Blaney has served as the district director of the U.S. Small Business Administration for the State of Arizona since 1998. His experience includes work as a federal agent, police officer, vice-president of an insurance brokerage and district director for the late Congressman Jack Kemp. 

About the U.S. Small Business Administration 

The U.S. Small Business Administration makes the American dream of business ownership a reality. As the only go-to resource and voice for small businesses backed by the strength of the federal government, the SBA empowers entrepreneurs and small business owners with the resources and support they need to start, grow or expand their businesses, or recover from a declared disaster. It delivers services through an extensive network of SBA field offices and partnerships with public and private organizations. To learn more, visit. 

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Last year was monumental to say the least. Life as we once knew it became a thing of the past, for individuals and businesses alike. As countless businesses struggled to adjust to the unforeseen challenges presented by the pandemic, the Paycheck Protection Program (PPP), part of the CARES Act, was a lifeline for many.

The PPP loan program was intended to help small businesses, although numerous large businesses also benefited. According to the Small Business Administration, over five million PPP loans were approved, the majority of which went to small businesses. Ninety-two percent of the loans given out were $250,000 or less and 87% were under $150,000. The average loan size was $100,729. 

Many businesses needed the money to keep employees working and to pay for everyday expenses to keep the business open. Business owners were told that the loan would also be “forgiven” as long as the money was spent on payroll (60% requirement), mortgage interest, utilities and rent during the eight or 24-week period after disbursement. While the rules for how to use the PPP loan funds were fairly straightforward, the tax effects remained murky.  For months the IRS has taken the position that the expenses paid with PPP loans which were forgiven would not be deductible on the business’s tax return. With bated breath, the nation awaited Congressional relief with respect to COVID-19. Relief came through at the last minute, including a provision that expenses paid with PPP will be deductible. Congress also reiterated that any forgiven PPP loans will not be includible in the business’s income.

Here are six things you should know about PPP loans and your taxes:

You Can Deduct Expenses Paid for with the Loan Proceeds Payroll, mortgage interest, rent and utility expenses are all forgivable uses of the loan and Congress has superseded the IRS’s guidance in Notice 2020-32 disallowing such expenses. Not only are these expenses deductible, but Congress has broadened the categories of expenses that may be paid for with PPP funds to include: software, cloud services, accounting, human resources, property damage due to civil unrest, personal protective equipment, and supplier costs ordered or contracted for prior to loan approval.

You Do Not Have to Include Forgiven PPP Funds in Income While loan proceeds forgiven by the lender are generally includible in income, PPP loan forgiveness is an exception to the general rule. Businesses do not have to include the debt forgiveness in their income.

You Can Take Advantage of the Families First Coronavirus Response Act (FFCRA) The FFCRA requires some employers to provide employees with paid leave for reasons related to COVID-19. However, businesses can still take advantage of the FFCRA tax credits in addition to utilizing the PPP loan.

You Can Defer Payroll Taxes Under the CARES Act, employers may elect to defer payroll taxes from March 27 through December 31, 2020. Fifty percent of the deferred taxes accumulated in 2020 must be paid by December 31, 2021 and the remainder must be paid by December 31, 2022. 

You Cannot Use PPP Money to Pay for Business Taxes As mentioned above, the PPP loan may only be used for certain identified categories of expenses. You cannot use the loan proceeds to pay income, sales, or other tax liabilities.

You Can File an Amended Tax Return If you applied for forgiveness but have not received a decision from the IRS at the time of tax return filing and you later learn that you will not receive full or partial forgiveness, you may make the related adjustments by filing an amended return.

Taxes are daunting even without COVID-19 and PPP loans to worry about. Add in conflicting guidance by multiple government agencies and it is understandable that a small business owner may feel overwhelmed. Fortunately, Congress enacted favorable provisions applicable to PPP funds and provided certainty to small businesses awaiting answers before year’s end. If you need further guidance, the tax lawyers at The Cavanagh Law Firm are always available to answer any questions. 

Giselle Alexander is an Arizona Certified Tax Law Specialist, a CPA, and holds a Masters in Law in Taxation. Giselle represents clients at all states of the tax controversy process and is one of only a few tax attorneys in the U.S. with experience in trying 831(b) micro captive insurance cases before the U.S. Tax Court.

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