Home Health & Hospice Week

Form applies to companies with loans of $50K or less.

The Small Business Administration has issued a new form that will ease burdens on both small CARES Act Paycheck Protection Program borrowers and lenders.

On Oct. 8, SBA “released a simpler loan forgiveness application for [PPP] loans of $50,000 or less,” it says in a release. “This action streamlines the PPP forgiveness process to provide financial and administrative relief to America’s smallest businesses while also ensuring sound stewardship of taxpayer dollars.”

Except: “Any borrower that together with its affiliates received [PPP] loans totaling $2 million or greater” can’t use the simplified form, the SBA says in an interim final rule on the application, scheduled to appear in the Oct. 19 Federal Register. The rule provisions took effect Oct. 14.

The new simpler form “requires far fewer calculations and less documentation than the previously released regular and ‘EZ’ forms,” notes law firm Vinson & Elkins in online analysis. “Borrowers using the simple form are not required to show the calculations used to determine their loan forgiveness amount,” the firm explains.

“We are committed to making the PPP forgiveness process as simple as possible while also protecting against fraud and misuse of funds,” Treasury Secretary Steve Mnuchin says in the SBA release.

Big news: The SBA and Treasury Department are exempting PPP loan recipients from the full-time equivalent (FTE) employee reduction penalty and the employee salary and wages reduction penalty, the agency says in the rule.

“The additional exemptions … are consistent with the purposes of the CARES Act, including to provide much-needed financial assistance to a broad range of small businesses, and provide borrowers appropriate flexibility in the current economic climate,” the rule says.

“There are approximately 3.57 million outstanding PPP loans of $50,000 or less, totaling approximately $62 billion of the $525 billion in PPP loans,” the regulation reveals. The new exemptions will affect about $49 billion of that pool.

More big news: The SBA is also lightening the oversight role for lenders processing the forgiveness applications for all PPP loans. “Lenders may rely on borrower representations” for loan calculations, SBA says in the rule. In other words, “the lender does not need to independently verify the borrower’s reported information if the borrower submits documentation supporting its request for loan forgiveness and attests that it accurately verified the payments for eligible costs.”

Watch out: That doesn’t rule out audits down the road though, experts warn. “PPP borrowers are required to retain all records relating to PPP loans for six years, including documentation supporting forgiveness applications, eligibility certifications, and compliance generally,” Vinson & Elkins stresses. “Borrowers are required to grant SBA officials access to this documentation upon request.”

Meanwhile, keep an eye out for more developments on the PPP front. “We continue to favor additional legislation to further simplify the forgiveness process,” Mnuchin says in the release.

That uncertainty may be a good reason to sit tight in multiple areas, advises Victor Evans with VonLehman & Co. “Jumping to apply for forgiveness or quickly filing associated tax filings may not be the best approach,” Evans offers in online analysis. “We recommend businesses extend their tax filings in hopes of receiving additional guidance. We also advise our clients to hold off on filing for loan forgiveness, and consult with their advisor for recommendations of the most tax-advantageous approach for their specific situation.”

Note: The rule is at https://public-inspection.federalregister.gov/2020-23091.pdf.