For months, small businesses have been waiting for news of when the loan forgiveness portion of the Paycheck Protection Program would begin. Today, the Small Business Administration has announced a plan to forgive almost 70% of the loans it gave out to millions of recipients of the PPP.
“The new guidance that has come out from the treasury department and the SBA aim to ease the process for applying for forgiveness of loans under $50,000,” said Molly Day with the National Small Business Association.
The new guidance forgives PPP loans that were $50,000 or less but has one rule, complete forgiveness requires the small business has no employees. Businesses where the owner is the only employee, can now have most or all of their loan forgiven. Initially, the requirement to qualify for PPP loan forgiveness was that 80% of the loan was to be used toward paying employees. The new rule also eases the burden of PPP lenders allowing them to process loan forgiveness applications more quickly.
“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.”
The new process does not come with the usual red tape that comes with most SBA loan forgiveness programs. Instead, with consultation with the treasury department, the SBA has released a simpler one-page application that can be sent to lenders for processing. SBA began approving PPP forgiveness applications and remitting forgiveness payments to PPP lenders for borrowers on October 2, 2020. SBA will continue to process all PPP forgiveness applications in an expeditious manner.
The SBA released additional guidance on Tuesday confirming that PPP loan forgiveness applications are not due on Oct. 31. The SBA explains that borrowers may submit a loan forgiveness application any time before the maturity date of the loan, which is either two or five years from the loan’s origination, depending on the borrower’s agreement. But the SBA also reminds borrowers that loan payments are deferred only until 10 months after the last day of each borrower’s loan forgiveness covered period.
The hope of the SBA and Congress is to relieve the pressure of added debt hanging over the heads of millions of small businesses and hopes to release that pressure to allow them to take on additional debt needed to operate and save their businesses. The SBA has stated there is no guarantee and they are still pushing for Congress to provide more aid to the millions of small businesses in the next stimulus and are asking for the new guidance to be extended to loans of $150,000 or less.
Click here to view the simpler loan forgiveness application.
Click here to view the instructions for completing the simpler loan forgiveness application.
Click here to view the Interim Final Rule on the simpler forgiveness process for loans of $50,000 or less.
About the Author:
Aireka Harvell is the founder and CEO of Nodat Inc. and a thought leader for the small business industry. Nodat is the first single platform for acquisition, retention, and promotion that helps small businesses drive new and repeat customers.