SBA Launches New (Even Easier) Forgiveness Application for PPP Loans of $50,000 or Less

The U.S. Small Business Administration is offering to make it even easier to apply for PPP loan forgiveness–but only for the smallest borrowers.

On Thursday, the SBA along with the U.S. Treasury Department issued a new, streamlined loan forgiveness application for businesses with Paycheck Protection Program loans of $50,000 or less. The measure, as outlined in an accompanying final interim rule, further simplifies the loan forgiveness process, following the SBA’s release of a more borrower-friendly “EZ” loan form in June. Businesses have been able to apply for forgiveness since August 10. 

“We are committed to making the PPP forgiveness process as simple as possible while also protecting against fraud and misuse of funds,” Treasury Secretary Steven Mnuchin said in a statement. “We continue to favor additional legislation to further simplify the forgiveness process.”

In addition to requiring fewer calculations and less documentation for eligible borrowers, the new form–Form 3508S–does not require borrowers with loans of $50,000 or less to reduce their loan forgiveness calculations if they’ve cut headcount or salaries.

Previously, to get full forgiveness, borrowers of any amount had to maintain headcount through the covered period and at the time of forgiveness. They couldn’t cut employee pay more than 25 percent during the 24-week covered period, either. A safe harbor was granted to employers that were unable to reopen fully or at all during the pandemic, as well as to firms that tried to rehire an employee who refused to return.

While the new application is available to the approximately 3.57 million borrowers–out of 5.2 million–with loans of $50,000 or less, not all borrowers will be able to benefit.

For starters, the application is not retroactive. So if you’ve already applied for PPP loan forgiveness you are out of luck. If your company is part of a larger organization, you may not be allowed to use the application even if your loan is under $50,000. The application is available only to borrowers, who together with affiliates received loans totaling less than $2 million. 

For sole practitioners, the headcount and wage reduction exemptions don’t really matter. Approximately 1.71 million PPP loans of $50,000 or less were made to businesses that reported having zero employees (presumably not counting the owner as an employee) or one employee, according to the SBA’s own estimates.