Good News if Your PPP Loan is for $50,000 or Less

You are likely approaching the time when you will need to apply for Paycheck Protection Program (PPP) loan forgiveness. Here is some good news if your PPP loan:

  • Considered your employees
  • Is for $50,000 or less

If you meet those conditions, your loan forgiveness amount may have increased by 100 percent even though you reduced pay or headcount

Before the $50,0000-or-less rule was instituted, you had to suffer a reduction in loan forgiveness or meet one of many exceptions that allowed you to cut annual salaries or hourly wages by more than 25 percent and/or reduce the number of employees or average hours paid.

Now, with a PPP loan of $50,000 or less, you do not have to consider the myriad of rules about employees. Regardless of what you did with your employees, you qualify for full forgiveness if:

  • Your PPP loan is $50,000 or less
  • You spent the PPP money on costs that are eligible for forgiveness
  • At least 60 percent of the forgiveness is for qualified payroll costs (including defined payroll for owners)

For example, Henry obtained a PPP loan of $34,000 based on his Schedule C income and pay to his part-time employee. When Covid-19 hit, Henry laid off his part-time worker and has not rehired him. Using SBA Form 3508S and the 24-week covered period, Henry qualifies for 100 percent forgiveness of his $34,000 loan because he spent $20,833 (61 percent) on the deemed payroll to himself and the remainder on five months’ rent and utilities.

Note on the Form 3508S expiration date: The SBA form has an expiration date of October 31, 2020, listed on the upper right corner; however, the SBA says we should disregard that date. The exacting wording from the SBA is, “The expiration dates in the upper right corner of the posted PPP loan forgiveness application forms . . . reflect the temporary expiration date for approved use of the forms. This date will be extended, and when approved, the same forms with the new expiration date will be posted.”