Simplified Forgiveness for PPP Loans of $50,000 or Less

October 14, 2020 | Kristine A. Tidgren

Late Thursday, October 8, the Small Business Administration issued a new Form 3508S forgiveness application and instructions promising simplified forgiveness for Paycheck Protection Program loans in the amount of $50,000 or less. The application accompanies a new interim final rule (IFR) also exempting these borrowers from a subtraction from forgiveness for reductions in full-time equivalent (FTE) employees or in salaries or wages.  

Form 3508S and De Minimis Exemption from Reduction

The IFR provides that a borrower with a PPP loan of $50,000 or less (except for any borrower that together with its affiliates received loans totaling $2 million or greater) may use the new Form 3508S (or a lender’s equivalent form) to apply for loan forgiveness.

Notably, the guidance states that a borrower who uses the simplified form is exempt from any reductions in the borrower’s loan forgiveness amount based on (1) reductions in full-time equivalent (FTE) employees or (2) reductions in employee salary or wages.

The agencies explain that the de minimis exemption from the FTE and salary reductions is an appropriate exercise of their joint rulemaking authority to grant de minimis exemptions under section 1106(d)(6) of the CARES Act.  These exemptions, they state, are consistent with the purposes of the CARES Act, including to provide much-needed financial assistance to a broad range of small businesses, and provide borrowers appropriate flexibility in the current economic climate.   

Expiration Date?

Some observers have noted that the new form has an October 31, 2020, expiration date in the top right corner. The SBA clarified in an October 13, 2020, FAQ that the date does not impact the deadline for forgiveness or the ability of borrowers to use the form after that time:

The expiration date in the upper-right corner of the posted PPP loan forgiveness application forms is displayed for purposes of SBA’s compliance with the Paperwork Reduction Act, and reflects the temporary expiration date for approved use of the forms. This date will be extended, and when approved, the same forms with the new expiration date will be posted.

Lender Review Rules

The IFR also provides that upon receipt of a Form 3508S, the lender shall:

  • Confirm receipt of the borrower certifications contained in the SBA Form 3508S or lender’s equivalent form AND
  • Confirm receipt of the documentation the borrower must submit to aid in verifying payroll and nonpayroll costs, as specified in the instructions to the SBA Form 3508Sor lender’s equivalent form.

The guidance states that providing an accurate calculation of the loan forgiveness amount is the responsibility of the borrower and that the borrower shall not receive forgiveness without submitting all required documentation to the lender. Lenders are allowed to rely upon a borrower’s representations, as long as the borrower submitted required documentation and attested that he or she accurately verified the payments for eligible costs.

An FAQ in the guidance instructs that if a borrower submits documentation of eligible costs that exceed the loan amount, the lender need only confirm the borrower’s calculations on the loan application form, up to the amount required to reach the requested forgiveness amount.