One of the lingering questions about the Paycheck Protection Program (PPP) has been what will be required during the forgiveness application process. On October 8, 2020, the SBA released the Interim Final Rule on Additional Revisions to Loan Forgiveness and Loan Review Procedures Interim Final Rules (that’s a mouthful!), which answers some of these questions.
The stated purpose of this new release is to simplify borrower documentation and the loan review and forgiveness process for PPP loans, and especially for those of $50k or less. We read through it and here’s what we think you need to know.
Form 3508S: The Alternative Loan Forgiveness Application
The primary change to come out of the new rules was the alternative forgiveness application, specifically for businesses that received loans that total $50k or less. Both the Treasury and SBA think this new form finds a happy medium between the desire to streamline the forgiveness process yet still protect the veracity of the program as a whole and make responsible use of taxpayer funds.
Those that qualify for, and use, Form 3508S are exempt from any decrease in loan forgiveness if they had a reduction in full-time employees or had to reduce salaries due to the pandemic. This is good news for those that applied early and then were hit hard by the economic downturn.
Review Rule Changes
This new form meant that some of the previous rules had to be adjusted. Now when a borrower submits Form 3508S, the lender will confirm that they have received all necessary certifications and the payroll and non-payroll documentation. But the rules on the precision of what you have the submit have been loosened somewhat. If a business provides documentation of eligible payroll and nonpayroll costs that are more than the amount of their PPP loan, the lender is required to help confirm their calculations up to the amount required to reach the requested forgiveness amount. So, if your calculations don’t exactly match what you originally requested and received, it is still fine as long as they are more than the amount of the PPP loan.
With more than 3.5 million PPP loans issues for $50k or less, which is nearly 12% of the total of $525 billion in loans, this will decrease the amount of time and effort required for a lot of loan recipients. The downside is that lenders will have the adjust their systems and processes to accommodate for this new form which could cause delays in accepting and processing forgiveness applications for these smaller borrowers.
If you would like to talk about how to complete your application to maximize the amount of loan forgiveness, we are happy to help.