Revisions to Loan Forgiveness and Loan Review Procedures were issued on Thursday, October 8. In these revisions made by the Small Business Administration (SBA) and the Treasury Department, recipients of Paycheck Protection Program (PPP) loans of $50,000 or less will be able to apply for forgiveness using a simplified application. The new application, Form 3508S, is one and a half pages long and requires the borrower to verify that the amount that is being requested for forgiveness is in accordance with PPP requirements. Documentation consists of payroll and non-payroll costs such as mortgage interest payments, rent, or utility costs.

Looking at the instructions to Form 3508S, it is clear that for borrowers who fall into this category of having PPP loans of $50,000 or less will not receive automatic forgiveness. The good news is that the standard application for forgiveness (Form 3508) is long, confusing, and time-consuming, however, the new form completely removes this. This simplified application incorporates a new interim final rule (IFR) providing new guidance concerning forgiveness and loan review processes. Specifically, a borrowers of a PPP loan of $50,000 or less is no longer required to reduce the amount eligible for forgiveness if the borrower:

1. Reduces the salary or hourly wage of an employee (who earned less than $100,000 in 2019) during the “covered period” following the borrowing relative to the first quarter of 2020, or
2. Reduces full-time equivalent employees (FTEs) during the covered period relative to a base period.

Meaning, that borrowers are exempt from the PPP requirement that FTE employee numbers pre-pandemic must remain the same during the covered period as well as not reducing employee wages. The CARES Act (Section 1106) gave the authority to the SBA Administrator as well as the Treasury Department to create such exemption.

Aside from those very important exemptions, the application process is largely the same. Borrowers must still compute the amount that they are eligible for forgiveness, but now borrowers do not have to show their math. However, that math should stay readily available in case the SBA requests it at any time.

The SBA is currently processing these forgiveness claims. Borrowers that seek forgiveness must submit a form and accompanying documents within 10 months from the end of their covered period. The lender will then have 60 days to determine whether the loan was forgiven.

There have been 5.2 million approved PPP loans, 3.57 million of which were for $50,000 or less. These loans accounted for $62 billion of the allotted $525 billion in PPP loans. This new forgiveness application can help millions of borrowers.

For those who are not eligible to use the Form 3508S and, instead, have to use Form 3508, a set of step-by-step instructions which is linked here.

For use of any of the forms mentioned here, please see below:

1. Form-3508S.pdf
2. Form-3508S-Instructions.pdf
3. Form-3508.pdf

Submitted by: Kendra May