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Paycheck Protection Program forgiveness simplified for small loans

The Paycheck Protection Program (PPP) was part of the CARES Act passed in March. It was meant to provide struggling businesses with relief in the form of Small Business Association-backed loans. The loans are forgivable as long as they were used for specific purposes, such as retaining employees for eight weeks.

Many businesses have been confused by rule changes and by the program itself, which was passed quickly. The SBA wasn’t even processing loan forgiveness applications until a Oct. 2.

Now, however, the SBA and the U.S. Treasury have announced that the loan forgiveness process has been simplified for those who borrowed $50,000 or less (unless they and their affiliates borrowed $2 million or more in total).

Treasury Secretary Steven T. Mnuchin issued a statement committing to making the forgiveness process as simple as possible while continuing to protect against fraud and abuse. For its part, the SBA promised to process PPP loan forgiveness applications expeditiously.

The simplified rule reduced the complexity of calculating full-time equivalents and reductions in wages. Some critics say it doesn’t go far enough, however, and doesn’t even apply to the majority of loans under $50,000. Many businesses were hoping for further simplification, including an automatic forgiveness process where you didn’t have to guess whether you qualify.

Currently, both your lender and the SBA have to sign off before your loan forgiveness can be approved.

The simplified rule is expected to help about 9 million companies obtain forgiveness. It won’t help sole proprietors or partnerships that didn’t have very many employees to save. Those businesses wouldn’t have to calculate employee-based things like full-time equivalencies.

If you are interested in applying for PPP loan forgiveness, here is a link to the application and instructions.

Other CARES Act relief

The CARES Act also allows you to take advantage of a net operating loss tax break. Losses can now be carried by five years. Experts suggest that this will result in a lot of amended returns as the total losses for 2020 and 2021 are calculated.

The key to operating successfully during these trying times may be cash flow management. If you have paper losses due to depreciation or other non-cash deductions, the tax break could significantly improve your cash flow.

If your business is struggling due to the pandemic, now may be the time to discuss your priorities with an experienced business attorney. A good attorney can help you minimize losses and maximize potential profits, or reorganize your business if that is the most appropriate step.