Loan Forgiveness

SBA Issues New Forgiveness Guidance for PPP Loans of $50,000 or Less

On October 8, 2020, the Small Business Administration (SBA), in conjunction with the U.S. Treasury Department, issued its latest Interim Final Rule.  To streamline and simplify the loan forgiveness process, borrowers with Paycheck Protection Program (PPP) loans of $50,000 or less may now use Form 3508S to support their application for forgiveness.  It should be noted that affiliated borrowers that received PPP loans in the aggregate of $2 million or more are precluded from using Form 3508S.  Here are the Form 3508S instructions.

While PPP borrowers were eligible for loans up to $10 million, nearly 3.6 million of the 5 million total PPP loans were at or below $50,000.  Lenders and borrowers alike, prior to SBA’s October 8 action, faced significant calculation and documentation requirements, irrespective of loan size.  While the Form 3508EZ alleviated some of these requirements, PPP borrowers were still tasked with complex forgiveness calculations.

The SBA and U.S. Treasury Department listened – removing the potential negative forgiveness implications associated with full-time equivalent (FTE) and/or 25% salary reductions for borrowers with loans at or below this $50,000 threshold.  While eligible borrowers are still required to submit relevant payroll and non-payroll cost data, the FTE headcount and/or salary reduction calculations are no longer required.

This latest Interim Final Rule also addresses situations in which borrowers submit Payroll Cost and Non-Payroll Cost documentation to the lenders in excess of the borrower’s PPP loan.  The loan forgiveness that a borrower may receive cannot exceed the principal of the PPP loan (no matter if the borrower uses Form 3508, Form 3508EZ or Form 3508S).

Sax will continue to update you as further details are made available.  Reach out to your Sax advisor or email [email protected] with questions.  For more and on-going information relative to your state and business, visit Sax’s COVID-19 Resource Center.

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