SBA Makes PPP Forgiveness Easier for Small Loans

knowledge Oct 13, 2020

The Paycheck Protection Program provided a lifeline to millions of business owners all over the U.S. when it was unveiled this spring as part of the CARES Act, but the process of applying for PPP loan forgiveness has been confusing and exhausting for many borrowers. The good news is that this week, the SBA released a new forgiveness application to make it easier for business owners who received loans of $50,0000 or less to apply. The forgiveness application was shortened from twelve pages to only two. Here’s what you need to know about the new forgiveness application for smaller loans.

What Information are Borrowers Required to Provide on the New Application Form?

The new application form for borrowers of $50,000 or less is much simpler than the original form. Here is the info that the shorter form asks for:

Business Legal Name: Enter the same information as on your PPP application.

Business Address/Business Phone/Primary Contact/E-mail Address: Enter the same information as on your PPP application, unless something has changed since you applied.

SBA PPP Loan Number: Enter the loan number assigned by SBA when you were approved. You can request this number from your PPP lender if necessary.

Lender PPP Loan Number: Enter the loan number assigned to the PPP loan by your lender. You can request this number from your lender if necessary.

PPP Loan Amount: Enter the total amount of your PPP loan.

Employees at Time of Loan Application: Enter the total number of employees you had when you applied for your PPP loan.

Employees at Time of Forgiveness Application: Enter your current number of employees.

PPP Loan Disbursement Date: Enter the date that you received your PPP loan. If the loan was disbursed to you on more than one date, enter the first date on which you received PPP loan proceeds.

EIDL Advance Amount: If you received an Economic Injury Disaster Loan (EIDL) advance, enter the amount.

EIDL Application Number: If you applied for an EIDL, enter your EIDL Application Number.

Forgiveness Amount: Enter the total amount of your payroll and nonpayroll costs eligible for forgiveness. The amount entered must be lower than your total PPP loan.

Are Borrowers Still Required to Show Their Calculations?

With the new application form, borrowers who received a loan of $50,000 or less aren’t required to include the calculations they used to determine their forgiveness amount on their application form. The form just requires borrowers to fill out their forgiveness amount itself and provide some documentation of their expenses during the period covered by the loan, like mortgage payments and payroll.

Borrowers also won’t be required to provide as much paperwork with their forgiveness application. They won’t have to submit the documentation of their eligibility for a PPP loan or records of their compliance. However, the SBA does ask that all borrowers keep these records for 6 years after forgiveness in case of an audit.

Will Borrowers Still Be Penalized for Reducing Employees or Wages?

Under the original PPP rules, borrowers who laid off employees or cut wages couldn’t get their loans fully forgiven. However, the SBA has exempted borrowers who received $50,000 or less from this rule. Borrowers who took more than $50,000 will still see a reduction in their forgiveness amount if they lay off employees or cut pay.

Borrowers who received a loan of any amount still have to follow the requirements for spending their loan to get full forgiveness: 60% of the PPP loan must be spent on payroll costs and the other 40% can be spent on other expenses like mortgage or rent.

A Simpler Forgiveness Form Means Faster Processing

The SBA shortened the forgiveness application to make it easier for borrowers to apply, but also to make it more efficient to process. Since the new form is so much shorter and less complex, the SBA should be able forgive the loans more quickly. “Today’s action streamlines the forgiveness process for PPP borrowers with loans of $50,000 or less and thousands of PPP lenders who worked around the clock to process loans quickly. We are committed to making the PPP forgiveness process as simple as possible while also protecting against fraud and misuse of funds,” said Treasury Secretary Steve Mnuchin.

Mnuchin also stated that he plans on continuing to advocate for more streamlining in the forgiveness process. We will keep you updated with new developments here on the blog. In the meantime, you can see our data on PPP loan recipients all over the country here.

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