A Guide to Forgivable Loans for Small Businesses in 2021

Posted on 26 March 2021 by IRIS FMP

Categories: Global HR

Assistive loans, in the form of financial relief, have been instrumental in helping American firms – and their global counterparts – weather the uncertainty of the pandemic. Many popular predictions, as far back as early 2020, still hold firmly that local economies are, albeit resilient, looking financially troubled and fatigued.

Shuttered businesses, staggered reopens, and evolving safety guidelines – these are all familiar consequences of the pandemic. After more than a year of costly disruptions, the Federal Government responded with a fully forgivable form of financial relief, including other supportive aids, such as health provisions.

In addressing COVID-19, some of the notable measures have included:

Phase One:

  • Coronavirus Preparedness and Response Supplemental Appropriations Act (Match 2020)

Phase Two:

  • Families First Coronavirus Response Act (March 2020)

Phase Three:

  • Coronavirus Aid, Relief, and Economic Security Act/CARES Act (March 2020)


  • Paycheck Protection Program and Health Care Enhancement Act (April 2020)

Forgivable Loans for Small Businesses

In response, the U.S. Small Business Administration (SBA), backed by the Department of the Treasury, released a kind of stimulus or relief in the form of the Paycheck Protection Program (PPP), which offers “forgivable” loans to struggling small businesses. Sharing similarities with the UK’s Coronavirus Job Retention Scheme, the intention of the PPP loan scheme went beyond financial reprieve for small businesses. It focused on limiting payroll costs by encouraging employers to save or rehire furloughed employees.

In its analysis of the early rollout of the PPP scheme, Vox noted that the role of the program was always to “keep American workers on payroll”. This focus on payroll, as the backbone to this scheme, has helped some navigate these turbulent times with quick access to loans and other forms of financial relief.

However, for borrowers, the incentive for retaining employees was clear: after meeting certain criteria, businesses could have their loans forgiven in full.

How Does the Paycheck Protection Program Work?

Generally applicable to businesses with fewer than 500 workers, employers could loan a sizable sum to manage operational costs, particularly payroll, but also rent and utility bills. The period of coverage, which was originally eight weeks, was extended and modified under the PPP Flexibility Act.

What is the CARES Act – and Why Does it Matter?

Supported by the Department of the Treasury, the Coronavirus Aid, Relief, and Economic Security (CARES) Act, in addition to the Coronavirus Response and Relief Supplemental Appropriations Act of 2021, is designed to “provide fast and direct economic assistance for American workers, families and small businesses”.

The CARES Act is responsible for the delivery of various financial aids, with funding directed toward small businesses, such as the Paycheck Protection Program, or relief for workers, such as Economic Impact Payments. The revisions in 2021 extends, effectively, the borrowing potential of small businesses and workers alike.

What is the Consolidated Appropriations Act, 2021?

The Consolidated Appropriations Act (2021), or what are some are calling CAA, extends benefit coverage of the CARES Act and other supportive policies that have offered relief and key provisions during COVID-19. This includes policies such as The Families First Coronavirus Response Act (FFCRA). The main focus is financial respite for businesses with employees on payroll and employer-provided healthcare plans and benefits.

Paycheck Protection Program (PPP) and Health Care Enhancement Act

In addressing public safety during COVID-19, the Health Care Enhancement Act included a number of health provisions to provide additional support, especially domestic preparedness by freeing health resources and financial help for testing and hospital treatments.

How has the Paycheck Protection Program Scheme changed in 2021?

In late December 2020, Congress revived the relief program with a second rollout on a limited basis, promising funds to the tune of $284.5 billion, with further cash availability for “second-draw” or additional loans for returning borrowers. Although, unlike the first rollout, this time the funds are more narrowly focused on small businesses, according to the Wall Street Journal. The loan extension is part of the country’s broader effort to restabilize and reenergize its smaller businesses after over a year of the pandemic’s expensive disruptions.

Forecasting ahead, The Washington Post predicts a continuation of borrowable funds, but delivered more strategically, or targeting the unemployed or workers suffering the worst from the pandemic. This will likely evolve as the country – and the world – recovers in the second half of 2021.

Partnering with IRIS FMP for Payroll

It’s important for small businesses to focus on their payroll. But we understand how difficult this can seem when balancing the demands of running a successful operation in the US and beyond. Partnering with IRIS FMP can help ensure that payroll is compliant and accurate, allowing you the time to focus on the important things. Get in touch today.