Some businesses that accepted financing under the Paycheck Protection Program now have a streamlined path to receiving the promised forgiveness of those loans, under new guidelines released late Thursday.
The new guidelines apply to loans of $50,000 or less.
The Small Business Administration, in consultation with the Treasury Department, announced updated forgiveness instructions for Paycheck Protection Program loans of $50,000 or less, easing what many businesses had said had become a complicated and inscrutable process.
Under the new rules, PPP loans of $50,000 or less are exempt from reductions in loan forgiveness amounts based on reductions in full-time employees or the equivalent and reductions in employee salary or wages. The result for businesses is a form with fewer calculations and less required documentation. The new guidelines did not require congressional approval.
The majority of loans granted under the PPP will be eligible for the new guidelines. Nearly 3.6 million loans were originated under the PPP in amounts of $50,000 or less, totaling more than $62.7 billion. In all, 68.6% of PPP loans originated were for $50,000 or less, comprising 12.0% of the total dollars lent under the program.
The length of the new forgiveness application illustrates its comparative simplicity. The new SBA Form 3508S is two pages long, compared to the SBA Form 3508EZ, which stands at three pages, and it has one significant difference: It does not include a forgiveness amount calculation.
“A borrower that uses SBA Form 3508S (or lender’s equivalent form) is exempt from any reduction in the borrower’s loan forgiveness based on reductions in full-time equivalent (FTE) employees or reductions in employee salary or wages that would otherwise apply,” the SBA said in announcing the guidelines.
The new guidelines, though, have limitations. If you are a borrower that together with your affiliates received PPP loans totaling more than $2 million, SBA Form 3508S is not eligible for use.
For those borrowers whose loans exceed $50,000, bigger relief, though, may still be on the horizon.
Proposed legislation that would provide blanket forgiveness to PPP loans of $150,000 or less has won support from a bipartisan group of lawmakers, as well as from Treasury Secretary Steven Mnuchin. But despite this support, and that of roughly 125 banking and non-banking organizations and others, the bill is sitting idle in the House and Senate.
Like the benefit to loans of $50,000 or less, the impact of such legislation would be significant to incrementally larger borrowers. There are nearly 1 million loans that were made in between $50,000 and $150,000 under the PPP, totaling approximately $84.7 billion.
For more information on how the coronavirus is affecting midsize businesses, please visit the RSM Coronavirus Resource Center.
