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$50,000 PPP Borrowers: Relief is Here – Again!

October 13, 2020

Late last week the United States Small Business Administration (the “SBA”) released a streamlined loan forgiveness application for Paycheck Protection Program (“PPP”) borrowers with loans of $50,000 or less. The new form in many ways serves as a “check the box” process for loan forgiveness.  The new application not only helps relieve the smallest of borrowers from much of the administrative and financial burdens associated with a full blown forgiveness application, but it also will free up capacity for lenders and the SBA to deal with larger PPP loan forgiveness applications.

 “The PPP has provided 5.2 million loans worth $525 billion to American small businesses, providing critical economic relief and supporting more than 51 million jobs,” said Secretary Steven T. Mnuchin.  “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,” he continued.  “We are committed to making the PPP forgiveness process as simple as possible while also protecting against fraud and misuse of funds.  We continue to favor additional legislation to further simplify the forgiveness process.”

Of the 5.2 million total PPP loans made, 3.57 million (over 68%) were to borrowers of less than $50,000 and of those 1.7 million (over 32%) were to one employee businesses.  This subset of borrowers represents just $63 billion of the $525 billion borrowed.  The foregoing data points were major considerations that the SBA and Treasury used when determining the $50,000 forgiveness threshold.  Originally, PPP lenders and small business groups were pushing for a streamlined forgiveness process for all PPP loans of up to $1,000,000.  However, over the past few months, this request dropped to $500,000 then to $250,000 before gaining traction at $150,000.  Regardless of how we got here, the $50,000 threshold is good news for many, but falls short of what had been originally hoped for by others

Click here to view the streamlined loan forgiveness application for loans of $50,000 or less.

Click here to view the instructions for completing the streamlined loan forgiveness application for loans of $50,000m or less.

Click here to view the Interim Final Rule explaining the SBA’s logic on how they reached this decision.  

Borrowers will still need to make certain representations on the streamlined application, including that the dollar amount for which forgiveness is requested does not exceed the principal amount of the PPP loan and:

  • was used to pay costs that are eligible for forgiveness (payroll costs to retain employees; business mortgage interest payments; business rent or lease payments; or business utility payments);
  • includes payroll costs equal to at least 60% of the forgiveness amount;
  • if a 24-week Covered Period applies, does not exceed 2.5 months’ worth of 2019 compensation for any owner employee or self-employed individual/general partner, capped at $20,833 per individual; and
  • if the Borrower has elected an 8-week Covered Period, does not exceed 8 weeks’ worth of 2019 compensation for any owner-employee or self-employed individual/general partner, capped at $15,385 per individual.

However, borrowers of $50,000 or less will no longer be required to prove that they did not reduce headcount or reduce salaries by over 25% to receive full forgiveness. 

Just because the SBA has streamlined the forgiveness process for these smaller borrowers, it is important for borrowers to remember that they are still required to maintain supporting documentation for their PPP loans, they are just not required to submit it.  This documentation includes all records relating to a borrower’s PPP loan, including the documentation:

  • submitted with the initial loan application;
  • supporting the borrower’s certifications as to its eligibility for a PPP loan;
  • supporting the borrower’s loan forgiveness application; and
  • demonstrating the borrower’s material compliance with PPP requirements.

Each borrower must retain all of the above referenced documentation in its files for six years after the date its loan is forgiven or repaid in full, and permit authorized representatives of the SBA, including representatives of its Office of Inspector General, to access such files upon request.

The subject matter of COVID-19 related posts are often very technical.  It is also an evolving area of law and very fact specific.  Our goal here is to simply alert you to some of the key issues involved.  We urge you to seek competent legal counsel before applying these ideas to your specific situation.  Since March, we have had a team of attorneys focusing on COVID-19 related developments and they continue to stand ready to help you with any issues involving the pandemic.