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

COVID-19 Business Update

A new interim final rule (IFR) released by the Treasury and the U.S. Small Business Administration (SBA) provides new 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 simplified 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. Such an affiliate is not eligible to use this new guidance, even if the entity’s separate company loan is $50,000 or less. The affiliate will still have to calculate FTE and wage reductions, and use either the regular application or the EZ application, as appropriate.

In determining a $50,000 threshold versus the previously rumored $150,000 threshold, the SBA, within the interim final rule, does shed some light on its thought process. The guidance impacts about 3.5 million loans (68%) but only $62 billion (~12%) of lending. Of the 3.5 million loans, nearly half reported one or zero employees on their applications. The SBA thinks that this size business has a high likelihood of qualifying for one of the FTE or wage reduction exemptions. Therefore, the SBA determined that the relief should apply to these businesses. Click here to read the loan program report issued by the SBA.

Borrowers of $50,000 or less still will have to make some certifications and provide documentation to the lender for payroll and nonpayroll costs.

The information presented here should not be construed as legal, tax, accounting, or valuation advice. No one should act on such information without appropriate professional advice and after a thorough examination of the particular situation.