PPP Loan Forgiveness Updates: Burden Relief for Smaller Loans and Guidance for Changes of Ownership
The Treasury and Small Business Administration (SBA) have announced some burden relief for small business with PPP Loans, including a safe harbor for good faith need is automatically applied to those who received loans of less than $2,000,000 – welcome relief for many smaller organizations grappling with PPP loan forgiveness questions. For those with loans of $50,000 or less, there’s also a simplified version of the PPP loan forgiveness application, designed to ease the burden for small businesses and organizations.
Sailing to a Safe Harbor
The PPP loan program was intended to provide cash flow for businesses with economic uncertainty. Applicants applying for forgiveness are required to certify, and upon review, may be required to provide support for needing the PPP loan. Under the safe harbor, applicants together with their affiliates with loans totaling less than $2 million are deemed to have met the requirements of need.
Easier on Small Businesses – and on Banks
The simplified loan forgiveness application comes as a relief to many small businesses that were challenged to keep up with the forgiveness law changes on a smaller budget. The applicant is required to certify and provide support that the loan was used for eligible expenses such as payroll, but difficult calculations that are required in the full application are not used.
Banks that review applications and the SBA will also benefit from a reduced burden of full applications. The Simplified Loan Forgiveness application can be found on the Treasury’s website.
Guidance for Changes of Ownership
The SBA issued new guidance to provide necessary procedures if a company with an outstanding PPP loan has a change in ownership. For PPP loan purposes, a change in ownership is deemed to have occurred if:
- 20% or more of ownership interest is sold or transferred. Or,
- 50% or more of assets have been sold or transferred.
A borrower must notify their PPP lender in writing before a change in ownership happens, and some changes in ownership may require SBA approval and possible undesirable public disclosures.
The borrower of the PPP loan is responsible for complying with all borrower responsibilities, regardless of changes in ownership. If a borrower with an outstanding loan has a change in ownership, they are required keep a balance of cash in an escrow account for the amount of the loan until the forgiveness process has been finalized. Other procedures may apply, if change in ownership affects your business, we have a team of PPP loan forgiveness experts to help you through the process.
What to Do Next
For larger loans or more complex issues (or if you think you would benefit from professional advice with your smaller PPP loan forgiveness), our COVID-19 Advisory team can help – contact us for a consultation. We also offer set, fixed-cost service levels for PPP loan forgiveness consulting. If your loan is $2 million or less, take the PPP Loan Forgiveness Quick Test and one of our professionals will contact you with recommended next steps.
Contact us for PPP loan forgiveness consulting, or for other issues related to the CARES Act. We’re here to help.