Good news for small businesses that received Paycheck Protection Program (PPP) loans of $50,000 or less! On October 9, the Treasury and U.S. Small Business Administration (SBA) announced that those recipients can now utilize a simplified application to request debt forgiveness. Additionally, a new interim final rule (IFR) provides additional guidance concerning forgiveness and loan review processes for PPP loans of $50,000 or less.
Under the IFR, PPP borrowers of $50,000 or less are exempted from any reductions in forgiveness based on:
- Reductions in full-time-equivalent (FTE) employees; and
- Reductions in employee salary or wages.
The new application form, SBA Form 3508S, can be used by PPP borrowers applying for forgiveness on PPP loans with a total loan amount of $50,000 or less, unless those borrowers together with their affiliates received loans totaling $2 million or more. Instructions for Form 3508S also were released.
According to the Journal of Accountancy, of the 5.2 million PPP loans approved by the SBA, about 3.57 million were for $50,000 or less. Those loans accounted for about $62 billion of the $525 billion in PPP loans. About 1.71 million PPP loans of $50,000 or less were made to businesses that reported having zero employees or one employee.
The IFR streamlines the forgiveness process for PPP borrowers of $50,000 or less because they will not be required to perform potentially complicated FTE or salary reduction calculations. However, borrowers of $50,000 or less still will have to make some certifications and provide documentation to the lender for payroll and nonpayroll costs.
Congress created the PPP as part of the Coronavirus Aid, Relief, and Economic Security (CARES) Act, P.L. 116-136, which was signed into law on March 27. The legislation authorized Treasury to use the SBA’s 7(a) small business lending program to fund loans of up to $10 million per borrower that qualifying businesses could spend on payroll, mortgage interest, rent, and utility payments.
PPP borrowers can qualify to have the loans forgiven if the proceeds are used to pay certain eligible costs. The program stopped accepting applications on August 8 with almost $134 billion of congressionally approved funds remaining unspent.
If you are a client who needs help filling out this form and obtaining assistance, contact our office today. Please let us know when your bank opens (or whether they have opened) for application, and we will handle the process from there.