15 Oct PPP Loan Forgiveness Just Got Easier for Many Small Businesses
While many were holding out hope for a new COVID-19 stimulus package, that doesn’t seem to be coming any time soon. In response to this, the Small Business Administration (SBA) and the Treasury Department have offered their own sort of relief for small businesses seeking forgiveness on their PPP loans: If you have a PPP loan of $50,000 or less, you can now self-certify that you used the money properly to receive total loan forgiveness. Here’s what you need to know.
Documentation Is Still Required
While you may be able to self-certify your use of the PPP funds, documentation is still required to support your certification. Documents such as a payroll provider report or other receipts for your use of the funds can be submitted along with the new SBA Form 3508S. Alternatively, you can wait for your lender to update their online application portals, which should be completed for most lenders soon.
Reduction Rules Removed
Under the original PPP loan forgiveness rules, you had to prove that you did not reduce your workforce or employee salaries by more than 25%. If you did, you would suffer a reduction in the amount that could be forgiven on your loan. However, under the new rules, borrowers with loans of less than $50,000 no longer need to meet this requirement to have their loans completely forgiven.
Why Is This Being Offered?
The original PPP loans were offered as a way to help businesses keep employees on the payroll during the COVID-19 crisis. By only offering complete forgiveness to those who kept a majority of their employees, the loans helped businesses keep their doors open and workers to keep covering their bills. So, why would the SBA remove this requirement for total loan forgiveness?
The rationale behind it is rather simple: Nearly every borrower with a loan of $50,000 or less is either a sole proprietor, independent contractor, or employer with very few employees. Considering that business owners are unlikely to lay themselves off, the vast majority of these borrowers are already likely to qualify for total loan forgiveness. Even if employers with one other employee did lay off their only additional worker, the number of businesses that would fall into this category is minimal, and so, the loan amounts that would be impacted by these exemptions is negligible.
The change also offers the SBA some relief in processing loan forgiveness applications. To date, they have received approximately 96,000 applications, and very few have been reviewed. By allowing smaller borrowers to self-certify their appropriate use of PPP funds, they will hopefully be able to move through applications more quickly.
If you have a PPP loan of $50,000 or less, speak to your lender or download the new loan forgiveness application here. Our Provo business accountants are also available to answer any questions you may have about the new loan forgiveness requirements. Contact us today to schedule an appointment.