In what is news no more, there’s a change to the PPP loan program. Specifically, to the forgiveness process. Here is the latest update on PPP Loan Forgiveness.
Since almost the very beginning of the program, business lobbies have been asking for a simplification of the forgiveness program, so as not to burden already stressed small businesses. And also to make it easier on the lending institutions and the SBA which have to process these millions of loans.
To this end, the SBA, on October 8, 2020, issued another Interim Final Rule to simplify the forgiveness process for PPP loans under $50,000. Unfortunately, the SBA is constrained by the restrictions laid out in the CARES Act. Hence many agree that this did not go far enough to really help small businesses.
Simpler PPP Loan Forgiveness
The Interim Final Rule brought out a new one page Form 3508S for the forgiveness application. It is technically two pages but the second page is an optional Demographic Information Form. This is even simpler than the earlier released EZ Form.
Form 3508S
The Form asks for the most basic of information:
- Business Information: Name, Address, TIN, Contact Information
- PPP Loan Information: Loan Number, Loan Amount, Forgiveness Requested
- Any EIDL Advance obtained
- Number of employees at the time of PPP loan application
- Number of employees at the time of forgiveness requested.
As the borrower, you also have to certify the following:
- that you are not asking for more in forgiveness than the amount of loan you received
- that the loan amount was used in a manner commensurate with the intent of the loan (payroll costs, mortgage/rent payments, utility payments)
- that you spent at least 60% of of the loan proceeds on payroll costs
- with a 24 week covered period, any owner-employee or self-employed individual does not exceed 2,5 months of 2019 compensation, capped at $20,833
- or with a 8 week covered period, any owner-employee or self-employed individual does not exceed 2,5 months of 2019 compensation, capped at $15,385
- that you have not made a calculation error with any of these numbers
- and that you’re not intentionally fudging these numbers.
Consequences of Form 3508S
The good part is that there is no reduction in forgiveness amount for a reduction in employee hours or wages during the covered period after loan application.
The not-so-good news is that borrowers still have to provide all the supporting documentation to prove that the loan was used as intended. This provision was part of the CARES Act and hence still intact. Lenders also have to certify that they indeed received all the required documentation to support proper utilization of the loan by the borrower.
Supporting documents include evidence of payroll expenses and proof of mortgage/rent and utility payments that were applicable prior to February 15, 2020.
Your financial institution, which provided the PPP loan, will need some time to adjust to these changes. So if you have a loan that was less than $50,000, you may want to wait until your lender is ready with these new forgiveness application forms.
Overall, for loans of all sizes, lender responsibility to confirm borrower expenses have been slightly shifted. The goal is to make processing faster.
If your PPP loan is greater than $50,000, you still have to go with the original Forgiveness process (at least until the next Interim Final Rule!). Here is my post on that.
I hope this is helpful to you! Thanks for reading.
