Paycheck protection loans of $50,000 or less fully forgiven regardless of employee retention

Borrowers who received loans of $50,000 or less from the Paycheck Protection Program will now be forgiven for the full loan amount regardless of any decreases to their full-time employee count or wages.

That’s according to the latest guideline update from the Small Business Administration. The new streamlined application process for borrowers of smaller loans settles concerns of many employers of losing forgiveness eligibility for unsuccessfully using the funds to bring back full-time employees to pre-pandemic levels.

SBA officials began approving PPP forgiveness applications and remitting forgiveness payments to PPP lenders for their borrowers on Oct. 2, almost two months after the system for forgiveness applications opened in August. To streamline the process for small business borrowers whose loan was $50,000 or less — 76% of Pennsylvania borrowers and 68% of borrowers overall — the SBA issued a simpler forgiveness application for that class of borrowers.

“It’s a win for those class of borrowers because it makes their lives a lot simpler,” said Ryan Hurst, a partner with the business consulting services group of Lancaster-based RKL. “It certainly helps the borrowers in terms of the amount of info they need to prepare. But it’s more for the lenders and the SBA itself, with less for them to review.”

PPP funds were a lifeline for many small businesses who applied through their lenders beginning in April to cover payroll costs, pay certain overhead expenses and retain full-time employees during the pandemic. The program has provided 5.2 million loans worth $525 billion to small businesses, which the SBA said supported more than 51 million jobs.

The SBA stopped accepting PPP loan applications on Aug. 8.

Guidelines for the PPP loan program have undergone significant revision since it was signed into law at the end of March as part of the CARES Act. Initially the program included an incentive for small business owners to re-hire and retain their full-time workforce by reducing the amount of a PPP loan that can be forgiven in proportion to the decrease in full-time equivalent employees or in wage and salary.

The SBA and Treasury Department said the latest rule “strikes an appropriate balance between the need for simplification in the forgiveness process with the responsibility to protect the integrity of the program and safeguard taxpayer funds.”

“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,” said Treasury Secretary Steven Mnuchin. “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.”