If the title of this post drew you to read it, I'm going to assume that you know what a Paycheck Protection Program (PPP) loan is, and the general history of the program.  Congress is right now mulling over more changes to the program which could also include another round of stimulus.  The interesting thing is that, at this point, most people who borrowed from the PPP aren't interested in "more."  What they really want is less.

 

Many of those who borrowed through the PPP have passed, or are at least nearing the end of their 24-week covered period.  They now need to file for forgiveness, but when they start reading through the application and related instructions, they begin to experience COVID-like symptoms.  If you've reviewed the application and instructions, then you know how complicated the calculations are and how many terms are poorly-defined.  When you add to that, the fact that they keep changing the rules, you may be wishing you had never applied for the loan in the first place.  We all suspected that in its early stages, it sounded too good to be true.  How right we were...

 

Most borrowers don’t want more changes to the program.  What they want is to know that their debt will all magically vanish, as we all hoped it would when the mad dash to borrow it began in late March. More practically, they just want their debt to be forgiven without having to navigate the complex calculations or pay someone else to do it.

 

The Small Business Administration (SBA) took at least one step toward making the process a little less painful.  On Thursday, the SBA released a new application.  If you're keeping track, that makes three (3) applications available to apply for forgiveness, depending on your situation.  This new application, form 3408S, is for PPP loans of $50,000, or less.   The new application form was accompanied by a new interim final rule (IFR), which exempts PPP borrowers of $50,000 or less from any reductions in forgiveness based on:

• Reductions in full-time-equivalent (FTE) employees; and

• Reductions in employee salary or wages.

 

Basically, this means that a borrower who borrowed $50,000 or less can fire employees and reduce wages with no consequences.  You may note the irony that such impunity runs contrary to the purposes of the PPP to begin with.

 

The new application form can be used by PPP borrowers with a total loan amount of $50,000 or less, unless those borrowers together with their affiliates received loans totaling $2 million or more.

 

The IFR streamlines the forgiveness process for PPP borrowers of $50,000 or less because they will not be required to perform potentially complicated FTE or salary reduction calculations. So, it doesn't make forgiveness automatic, as we might have hoped, but it is a step in the right direction.  Borrowers of $50,000 or less still will have to make some certifications and provide documentation to the lender for payroll and nonpayroll costs.

 

 Considering this is our third post this week regarding changes to the PPP, this might be an indication that the SBA realizes that the day of reconning has arrived, and they need to start answering our questions.  For those with loans over $50,000, there are still some significant questions related to the calculations and process.  Hopefully, the guidance faucet will remain open and flowing during the weeks ahead.

 

Stay tuned...