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PPP Loan Forgiveness Simplified for Loans of $50,000 or Less

by | Oct 23, 2020 | blog |

The Small Business Administration (SBA) recently issued a new rule that simplifies the loan forgiveness procedure for Paycheck Protection Program loans of $50,000 or less.  The new simplified procedure will apply to roughly 3.57 million individual loans, amounting to nearly $62 billion.  As we previously blogged, Congress established the Paycheck Protection Program (PPP) under the Coronavirus Aid, Relief, and Economic Security (CARES) Act.  This $669 billion-dollar loan program was designed to help businesses negatively affected by COVID-19 continue to pay their employees.

Previously, the amount of forgiveness a borrower could claim was reduced if the borrower reduced their staff or lowered their worker’s wages.  However, under the new rule, a borrower of $50,000 or less who applies for forgiveness “is exempt from any reductions in the borrower’s loan forgiveness amount based on reductions in full-time equivalent (FTE) employees… or reductions in employee salary or wages.”  The SBA made this change because over half of the PPP loans under $50,000 were given to employers with zero or one employees, and therefore weren’t affected by these exemptions anyway.

Borrowers of $50,000 or less are still required to certify that the amount requested for forgiveness was used for eligible purposes during the covered period, and that at least 60% of the forgiveness amount was spent on payroll costs.

In the past few months, lenders, trade groups, borrowers, and lawmakers have pushed to have the forgiveness simplified for loans up to $150,000.  The SBA’s newly issued rule is a step in this direction, and borrowers who received PPP loans greater than $50,000 should keep their eyes open for future developments that might simplify their loan forgiveness process in the future.