The U.S. Small Business Administration has started forgiving PPP loans of all amounts and cut the number of pages on the forgiveness application for small loans, officials announced Friday.
The agency began approving applications for the forgiveness of Paycheck Protection Program loans and making payments to banks and other lenders on behalf of the affected borrowers on Oct. 2, said SBA administrator Jovita Carranza.
Loans may be completely forgiven if the borrower abided by the employment and spending requirements of the PPP, the federal government’s flagship coronavirus-relief program for businesses and nonprofits. The forgiven portion of the federally guaranteed loan is repaid by the Department of Treasury.
With PPP loans that aren’t fully forgiven, the borrower pays 1% interest and has up to five years to pay back the lender. The loans are for up to $10 million per borrower.
Carranza said SBA has again streamlined the forgiveness application for those with PPP loans of $50,000 or less. The new form, 3508S, is two pages, down from the three-page 3508EZ, which was introduced in June.
The new forgiveness application may be found at nwsdy.li/PPPloan.
"The new form introduced today demonstrates our relentless commitment to using every tool in our toolbelt to help small businesses and the banks that have participated in this program," Carranza said.
SBA also has modified the requirement that forbids borrowers from reducing their head count or employee wages to be eligible for full loan forgiveness. Those with loans of $50,000 or less are "exempt from any reductions in loan forgiveness amounts" even if they made "reductions in full-time equivalent employees or in employee salaries or wages," states the procedures issued by the agency on Friday.
The change potentially affects 3.6 million of the 5.2 million PPP loans, or 70%. Loans of $50,000 or less total $62 billion, or 12% of the total $525 billion lent via the PPP from April 3 until the program ended on Aug. 8, according to data from SBA and the Treasury Department, which oversee the PPP.
"SBA believes that most borrowers would not be affected" by the change in eligibility for complete loan forgiveness "because the borrowers did not reduce full-time equivalent employees or reduce employee salaries or wages," the agency's procedures state.
Forgiveness applications should be submitted to the lender, not SBA. They should be submitted within 10 months of exhausting the loans funds and all funds must be used by Dec. 31.
Locally, more than 64,500 PPP loans were made in the four congressional districts that encompass most of Long Island. Newsday secured a $10 million loan in April.