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New PPP Loan Forgiveness Guidance For Loans Under $50,000

  • by CWA
  • •    October 12, 2020
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SBA offers simplified application form for forgiveness on smaller loans

On Oct. 8, 2020, the U.S. Treasury and Small Business Administration (SBA) issued new guidance streamlining the Paycheck Protection Program (PPP) Loan Forgiveness Application and providing guidance to lenders issuing these loans. A new application form (Form 3508S) and rule were issued for borrowers with a PPP loan under $50,000, unless they and their affiliates received loans totaling more than $2,000,000, making it easier for companies to get their loans forgiven.

The new Form 3508S includes a few new exemptions, making it much less cumbersome to complete.

Borrowers with loans under $50,000 are now exempt from any reductions in forgiveness based on:

  • Reduction in full-time-equivalents (FTE) employees; and
  • Reductions in employee salary or wages.

The borrower must still certify that the loan was used for forgivable expenses such as for payroll costs, business mortgage interest, business related rents or utility costs. The items that qualify for forgiveness did not change.

Although this simplifies the computation, borrowers are still required to submit documentation to the lender showing that the qualifying payroll costs and other forgivable expenses meet the requirements to provide forgiveness.

View the PPP Loan Forgiveness Application Form 3508S and the related instructions for borrowers.

The SBA has promulgated these new rules under its “de minimis” exemptions. The new rule reduces the lender’s responsibility to review the borrower’s documentation,  thus relieving the lender of having to independently verify submitted documents.

This has been an anticipated update, however the original hope was that it would apply to loans up to $150,000.  Congress has yet to agree on the higher loan amount, but at the time of the announcement, Treasury Secretary Steven Mnuchin stated, ”We continue to favor additional legislation to further simplify the forgiveness process,” offering a hint into further simplification to come for larger loans.

This is a step in the right direction for small businesses, allowing business owners to continue to focus on their business rather than complete complex applications.

We will continue to provide updates as they are announced. Stay current on the latest legislation and more at cainwatters.com/digitalblogs.

Cain Watters is a Registered Investment Advisor.  Cain Watters only conducts business in states where it is properly registered or is excluded from registration requirements. Registration is not an endorsement of the firm by securities regulators and does not mean the adviser has achieved a specific level of skill or ability.  Request Form ADV Part 2A for a complete description of Cain Watters investment advisory services. Diversification does not ensure a profit and may not protect against loss in declining markets.  Past performance is not an indicator of future results. 

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