New Legislation Would Grant Automatic Forgiveness of PPP Loans Under $150,000

A bipartisan bill called The Paycheck Protection Small Business Forgiveness Act has been introduced into the Senate that would allow small businesses who received a Paycheck Protection Program (PPP) loan of $150,000 or less to obtain automatic forgiveness after submitting a one-page attestation form. The attestation form would be limited to one-page, and the small business would simply attest that the loan is eligible for forgiveness and that the business complied with the requirements of the Paycheck Protection Program found in the CARES Act.

The legislation would be beneficial to the smallest of small businesses that received PPP loans of $150,000 or less, as well as the banks who lent to smaller PPP borrowers, by reducing the paperwork and documentation requirement currently required on all PPP forgiveness requests. These “smaller” small businesses, sometimes called “micro small businesses,” generally do not have in-house accountants and payroll departments to rely on for PPP professional assistance, and engaging an outside accountant or attorney for professional services isn’t something they do on a regular basis. These smaller PPP borrowers include a significant number of sole proprietors, independent contractors and one-person operators, as well as persons who have a “day job” and a side hustle.

Proponents of the legislation have explained that the bill would cover 85 percent of PPP borrowers, but only 26 percent of the funds obligated. Larger small businesses that obtained loans over $150,000 account for the vast majority of funds loaned under the PPP program (74 percent), and they will still be required to complete the standard PPP loan forgiveness application along with supporting financial and payroll records. These larger small businesses, which received PPP loans in excess of $150,000, have greater internal resources and usually work with outside accountants and lawyers who can assist with their PPP forgiveness requests.

Democratic Senator Kyrsten Sinema of Arizona is an original co-sponsor of the legislation and has been an advocate for small businesses during the pandemic. She said in a statement, “Fully forgiving Arizona small businesses’ PPP loans provides needed economic certainty to local employers — which have suffered losses through no fault of their own — while protecting Arizonans’ jobs and paychecks.”

Recent SBA data released on June 30 indicated that PPP loans have supported more than 51 million jobs, but if PPP forgiveness isn’t realized for small businesses, then PPP will simply turn into a debt burden on borrowers who are still trying to weather the economic storm.

The bill is pending in the Senate and is supported by small businesses, the American Bankers Association and all 51 state bankers’ associations. Banks and other lenders were encouraged by Congress and the SBA to loan to the smallest of small businesses. They are also tasked with processing PPP forgiveness applications on these same loans. By reducing the document and paperwork requirements on the smallest of small businesses, the banks who leant to these borrowers will also benefit, as they will be able to simply their own internal PPP forgiveness process and documentation requirements.


Read more articles