On October 8th, the U.S. Treasury Department issued new rules simplifying forgiveness for businesses who took out PPP loans of $50K or less. Back in March, Congress passed the CARES Act, which established the Paycheck Protection Program (PPP), an SBA loan designed to help small businesses maintain their workforce during the COVID-19 crisis. It offered SBA-backed loans that could be forgiven as long as the business met conditions such as retaining full-time employees for eight weeks and using a minimum of 60% of the loan towards payroll costs. However, a number of amendments and seemingly conflicting rules have left many business owners confused about how to go about getting their loans forgiven.
Prior to last week, no loan forgiveness applications were being approved by the SBA. This past Thursday night, a new forgiveness application, Form 3508S, and a new Interim Final Rule regarding loan forgiveness was unveiled.
What this means:
The SBA and the Treasury Department intends that this new application will simplify the forgiveness and loan review process. Under the new rule, PPP borrowers of $50,000 or less won’t have the amount of their loan forgiveness reduced based on reductions in full-time-equivalents or reductions in employee salary or wages. This means that borrowers who received small PPP loans likely won’t be penalized for laying off staff members or cutting employee hours due to financial hardship. The changes are estimated to cover approximately 9 million forgiveness applications. It should be noted that even with the new rule, borrowers are still required to provide additional information to the lender, certify how it’s reviewed, and calculate their payroll and non-payroll costs .