PPP Forgiveness Simplified For Loans Less Than 50K

Monday, October 26, 2020

Original article by Fuoco.com >

Recipients of Paycheck Protection Program (PPP) loans of $50,000 or less will be able to apply for forgiveness using a simplified application that was just released by Treasury and the U.S. Small Business Administration (SBA).

Under the interim final rules, PPP borrowers of $50,000 or less are exempted from any reductions in forgiveness based on:

  • Reductions in full-time-equivalent (FTE) employees; and
  • Reductions in employee salary or wages.

If you are an employee receiving PFL benefits, be aware the payments come from the state. If your employer participates in New York State’s Paid Family Leave program, you need to know the following:

The new application form, SBA Form 3508S, can be used by PPP borrowers applying for forgiveness on PPP loans with a total loan amount of $50,000 or less, unless those borrowers together with their affiliates received loans totaling $2 million or more. Instructions for Form 3508S also were released.

Of the 5.2 million PPP loans approved by the SBA, about 3.57 million were for $50,000 or less. Those loans accounted for about $62 billion of the $525 billion in PPP loans. About 1.71 million PPP loans of $50,000 or less were made to businesses that reported having zero employees or one employee.

The interim final rules streamline the forgiveness process for PPP borrowers of $50,000 or less because they will not be required to perform potentially complicated FTE or salary reduction calculations. Borrowers of $50,000 or less still will have to make some certifications and provide documentation to the lender for payroll and non-payroll costs.

Lender responsibilities
For PPP loans of all sizes, the interim final rules also contain guidance on lender responsibilities with respect to the review of borrower documentation of eligible costs for forgiveness in excess of a borrower’s PPP loan amount.

According to the interim final rules, when a borrower submits Form 3508S or the lender’s equivalent form, the lender will be required to:

  • Confirm receipt of the borrower certifications contained in the form; and
  • Confirm receipt of the documentation the borrower is required to submit to aid in verifying payroll and non-payroll costs, as specified in the instructions to the form.

The borrower is responsible for providing an accurate calculation of the loan forgiveness amount. The borrower will attest to the accuracy of the reported information and calculations on the loan forgiveness application. Lenders are permitted to rely on borrower representations.

In addition, the guidance addresses what a lender should do if a borrower submits documentation of eligible costs that exceed the borrower’s PPP loan amount. According to the interim final rules, the amount of loan forgiveness that a borrower may receive cannot exceed the principal amount of the PPP loan.

Whether a borrower submits SBA Form 3508, 3508EZ, or 3508S, or a lender’s equivalent form, the lender is required to confirm receipt of the documentation the borrower is required to submit to aid in verifying payroll and non-payroll costs. If applicable, the lender also is required to confirm the borrower’s calculations on the loan forgiveness application, up to the amount required to reach the requested forgiveness amount.