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 released Thursday by Treasury and the U.S. Small Business Administration (SBA).
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.
Borrowers of $50,000 or less still will have to make some certifications and provide documentation to the lender for payroll and nonpayroll costs.
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.
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 nonpayroll costs.
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.
The application can be found:
https://www.sba.gov/sites/default/files/2020-10/PPP%20Loan%20Forgiveness%20Application%20Form%203508S.pdf
If a company receives an EIDL advance and a PPP loan, proceeds from the advance will be deducted from the loan forgiveness amount.
To illustrate, say a company gets a $30,000 PPP loan and a $5,000 EIDL advance. The amount of the advance would be deducted from the forgivable amount of the PPP loan. So even if the company follows all of the loan forgiveness rules, the most that can be forgiven is $25,000. The company would need to repay the remaining $5,000 to the lender.
The SBA has requested that a company ask for forgiveness for the full amount of the PPP loan. For example, the company would request for forgiveness for $30,000 and the SBA will deduct the $5,000 after receiving the application. If the company requested forgiveness for $25,000, the $5,000 would still be deducted and they would receive forgiveness for a maximum amount of $20,000.