PPP Loan Forgiveness – News for PPP Borrowers of $50,000 and Below

There has been much anticipation that the SBA would announce some sort of automatic forgiveness for smaller Paycheck Protection Program loan Borrowers. The rumors were put to rest yesterday with the SBA issuing another Interim Final Rule. The IFR issued on October 8, “Additional Revisions to Loan Forgiveness and Loan Review Procedures” introduced a third forgiveness application available only for Borrowers with loan balances of $50,000 and below (excluding any Borrower that together with its affiliates received loans totaling $2 million or greater).

For Borrowers who qualify based solely by the size of their loan, the new Form 3508S has been shrunk to a single page. Information on this new forgiveness application is largely limited to identifying information, and a single line for the requested forgiveness amount being applied for. The balance of the page includes seven certifications that must be made by the Borrower. It is noteworthy that no forgiveness calculations appear on this newest form.

Borrowers Still Need Proof of How Funds Were Used

The 3508S submission still requires that the Borrower submit proof that PPP loan funds were used for eligible payroll and nonpayroll expenses during the Covered Period, including documents such as bank statements, third-party payroll service provider reports, payroll tax filings, cancelled checks, mortgage amortization forms, lender account statements, lease agreements or lessor account statements, and utility bills, as applicable to their claimed eligible costs.

Relief in Loan Forgiveness with Employment and Pay Levels

The greatest relief provided by this new interim final rule is found in the elimination of certain reductions in loan forgiveness associated with employment and pay levels. For those who qualify to use this form, they are now exempt from forgiveness reductions stemming from reductions in full-time equivalent (FTE) employees or in salary or wage rates. These reduction calculations can be complex and have been a concern of many Borrowers; the exemption for small Borrowers is a welcome relief!

Along with the new Form 3508S, this interim final rule also provides additional instruction to the Lenders regarding how to process this and other forgiveness applications. For this new 3508S, lenders are required to confirm receipt of the following:
• Borrower certifications
• Documentation to aid in verifying payroll and nonpayroll costs.

The SBA makes it clear that the accurate calculation of the loan forgiveness amount is the responsibility of the Borrower, and the Borrower attests to this. Lenders do not need to independently verify the Borrower’s information if the Borrower submits documentation supporting the loan forgiveness request and attests to its accuracy. It will be interesting to see how much scrutiny the Lenders apply to submissions using SBA Form 3508S.

Links to the Forms for Loans of $50,000 or less

Form 3508S
Instructions for Form 3508S