New Paycheck Protection Program (PPP) Forgiveness Rules for $50,000 and Under from the SBA

In October 2020, the U.S. Small Business Administration, (SBA) in consultation with the Treasury Department, released a simpler loan forgiveness application for Paycheck Protection Program (PPP) loans of $50,000 or less. This action streamlines the PPP forgiveness process to provide financial and administrative relief to America’s smallest businesses.

New PPP loans will be 100% forgivable if certain requirements are met. The bank must submit documentation to the SBA for final approval of the forgiveness request.

The Small Business Administration announced on January 12, that it had granted nearly 85 percent of the applications for Paycheck Protection Program loan forgiveness to date. Borrowers of $50,000 or less have fared even better, with an 88 percent forgiveness rate so far.

Here’s PPP forgiveness information to date so you can get the funding you deserve to rebuild in 2021.

PPP Forgiveness Takeaways

Here are key facts about the PPP forgiveness process and how it impacts business owners owing less than $50,000.

No calculations required

The new application form for PPP loans under $50,000 only requires borrowers to confirm the PPP-loan proceeds were used for eligible costs, and to provide supporting documentation showing expense payments. Small business owners should keep PPP loan forgiveness records for at least six years.

Documentation has been simplified

Only bank statements or cancelled checks are required to show payments from the business to the employee (including the business owner) to document the qualifying payments. Quarterly tax form 941 documenting paid payroll isn’t required.

Previously if an EIDL Advance was funded, it must be subtracted on the forgiveness request from the amount that would be eligible. However, this is another rule being debated. For more information about EIDL and PPP use, visit the SmartBiz Small Business Blog.

Use of proceeds expanded

This new round of PPP funding includes new uses of funds. This can help you rebuild your business faster and easier:

Allowable use of proceeds includes:

• Operations expenditures
• Payment for business software or cloud computing service that facilitates business operations, product or service delivery, the processing, payment, or tracking of payroll expenses, human resources, sales and billing functions, or accounting or tracking of supplies, inventory, records and expenses
• Cost related to property damage and vandalism or looting due to public disturbances that occurred during 2020 that was not covered by insurance or other compensation
• Covered supplier costs
• Expenditures made to a supplier of goods pursuant to a contract in effect before February 15, 2020 for the supply of goods that are essential to the operations of the entity at the time at which the expenditure is made
• Purchase of Personal Protective Equipment (PPE) and facility adaptations to protect employees and customers including masks, gowns and gloves. The is first PPE expense is going to be allowable. However the second expense is capped at $50,000.
• Does not include residential real property or intangible property

Be sure to check with your lender about specific uses.

Who is not eligible to use the simplified application for forgiveness?

Review these restrictions on the new forgiveness application:

• Small businesses that reduced their full-time employee headcount from pre-pandemic levels or have reduced pay rates more than 25 percent. In these instances, PPP borrowers need to use the standard PPP loan-forgiveness application, and qualifying payroll costs need to be reduced based on pay rate decreases or full-time employee headcount reductions.
• Small businesses that can’t use the new simplified application solely because their loan amount was greater than $50,000 should use the SBA’s PPP EZ Application.
• Small businesses that obtained a PPP loan more than $50,000 but less than $150,000*

Processing timeline for forgiveness applications

Although details have not been released, the first round of PPP funding required a small business to submit its PPP loan forgiveness application to the bank or lender who funded their PPP loan. The bank has 60 days to make a decision. If approved by the bank, the loan is then submitted by the bank to the SBA. The SBA then has 90 days to review and approve the application and will send payment to the bank paying off the small businesses PPP loan.

Ready to apply for PPP funding?

The new round of the Paycheck Protection Program is open NOW! The deadline to apply is May 31st, 2021 but it’s suggested that you apply ASAP as the funding ran out for the first round.

SmartBiz Loans is here to help you apply for this new round of PPP funding.

Start a streamlined application on the SmartBiz Loans website.