Friday, October 30, 2020
The PPP, enacted as part of the Coronavirus Aid, Relief and Economic Security Act, was intended to provide economic relief to small businesses hard hit by the coronavirus by providing funds needed to keep workers on payroll. In all, the program helped 5.2 small businesses with $525 billion in loans, according to the SBA and U.S. Treasury Department.
PPP loans are forgivable for borrowers who spent at least 60 percent of loan proceeds on payroll costs. Businesses that spent less than 60 percent of the money on payroll, or reduced headcount or employee wages after receiving the loans, can still have a portion of the amount forgiven, based on an SBA formula. Non-payroll costs eligible for forgiveness include mortgage payments, rent and lease obligations, and utility payments if the agreements dictating these payments were in place before February 15, 2020.
While the program was a welcome relief, many lending banks and borrowers have complained the process for seeking loan forgiveness is complex, requiring borrowers to complete extensive applications and to provide reams of supporting documents. In response, the SBA and the Treasury Department instituted in early October a new, simpler process for getting PPP loans up to $50,000 forgiven.
Now, small or micro-businesses, including small ISOs and individual merchant level salespeople who took out PPP loans can have the loans wiped out, even if they had to cut employees or wages. All they have to do is complete a simple, one-page application and provide bank statements, tax forms or payment receipts detailing how they spent the money.
The SBA posted a sample application on its website (available at bit.ly/2HPS0BI, but the actual applications borrowers complete must be obtained from lenders. The SBA and Treasury Department said the new forms will allow lenders to process forgiveness applications more swiftly.
The deadline for submitting a forgiveness application is 10 months after a borrower used up PPP funds to shore up payroll. Under the original legislation, small businesses receiving PPP loans had to disburse the funds for payroll within 10 weeks. Legislation was later passed that allowed borrowers to extend that to 24 weeks.
The SBA added that it began approving PPP loan forgiveness applications and remitting forgiveness payments to lenders on Oct. 2, and "will continue to process all PPP forgiveness applications in an expeditious manner." The new rules affect about 3.5 million loans, or about 66 percent of all PPP borrowers, according to SBA
The money lent through the PPP provided "critical economic relief and supported more than 51 million jobs," Treasury Secretary Steven Mnuchin said in a statement. "We are committed to making the PPP forgiveness process as simple as possible while also protecting against fraud and misuse of funds." Mnuchin added that the Trump administration would be open to additional legislation "to further simplify the forgiveness process."
It's unclear if that legislation is imminent, as negotiations between the administration and Congress over additional coronavirus relief measures have stalled.
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