News & Blog

July 22, 2020

The Paycheck Protection Small Business Forgiveness Act

The Paycheck Protection Small Business Forgiveness Act has been introduced by the Small Business and Entrepreneurship Committee to the Senate.

The Paycheck Protection Small Business Forgiveness Act his act would allow small businesses who received a loan of $150,000 or less through the Paycheck Protection Program (PPP) will receive forgiveness. To apply for automatic forgiveness, the business owner submits a one-page attestation form, which affirms that the loan is eligible for forgiveness, and the business complied with the requirements of the Paycheck Protection Program outlined in the CARES Act.

Automatic forgiveness will benefit banks and small business owners by reducing the document and paperwork requirements. The proposed legislation will benefit smaller businesses and the banks who made loans to these smaller PPP borrowers. Many times, sole proprietors and independent contractors generally do not have the staff to leverage human resources, legal, and accounting issues.

Program Forgiveness Parameters

The full application has been revised down from 11 pages to 5 pages – 4 pages of the application and 1 page of instructions. The “EZ” application has been revised from 5 pages to 3 pages – 2 pages of the application and 1 page of instructions. The United States Department of the Treasury stated the changes make it easier for businesses to realize full forgiveness of PPP loans.

Revised PPP Loan Forgiveness Application and instructions

EZ PPP Loan Forgiveness Application and instructions

Forgiving Small Loans

Automatic forgiveness for loans under $150,000 will give banks and government more resources toward processing higher-value loans and to maintain the integrity of the PPP. Smaller PPP loans are the least profitable for banks to manage. Unforgiven loan debt will convert to either a 2-year or 5-year loan at 1% interest. Varied reports state that banks can make between $18-$24 billion in fees. An American Banker story cited “AQN Strategies estimated that the cost of managing PPP Loans of less than $50,000 would ultimately cost banks about $500 million. Forgiving these small loans will save banks millions of dollars.”

Your business may have experienced financial fluctuations in the last 12 months, and you aren’t sure whether your organization will qualify for the available relief. Now is the time to consider leaning on your accountant for cash flow guidance, tax deadlines, completing SBA and CWCA loan applications, Family First tax credit calculations, and interpreting the CARES Act. Our accountants are available, and we have the knowledge, skill, and information that you need right now to address your financial needs in a timely fashion adequately.

Maria D. Stromple, CPA, MST

Maria is a partner at Wilke & Associates servicing closely-held businesses in manufacturing, real estate, transportation/logistics, and technology industries as well as high net worth individuals and executives in delivering effective tax strategies.

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