SBA Provides Simplified PPP Forgiveness Application and Relief to Borrowers of $50,000 or Less

Oct 28, 2020 4:02:05 PM



On October 8, 2020, the Small Business Administration (SBA) and the Department of the Treasury (Treasury) issued a new simplified two-page Form 3508S application, instructions for borrowers, and accompanying guidance aimed at benefiting small business owners who obtained Paycheck Protection Program (PPP) loans of $50,000 or less. Borrowers and their affiliates that received loans of $2 million or more may not use Form 3508S. The new application and guidance, effective October 14, 2020, provide much-anticipated relief for eligible borrowers, including forgiveness reduction exemptions and fewer reporting requirements. The Health, Economic Assistance, Liability Protection and Schools (HEALS) Act, legislation proposed by the Senate in July, would have provided automatic forgiveness (upon attestation of a good faith effort to comply with PPP requirements) to borrowers receiving $150,000 or less in PPP funds.

Forgiveness Reduction Exemptions

Under the new application and guidance, borrowers of $50,000 or less in PPP funds are exempt from any reduction in loan forgiveness as a result of a reduction in the number of full-time equivalent employees and reductions in employee’s wages or salaries that would otherwise apply under the CARES Act.

Simplified Reporting Requirements

Form 3508S does not require eligible borrowers to perform the potentially complicated calculations required in SBA Form 3508 as part of the application for PPP loan forgiveness. Borrowers are not required to show the calculations they use to determine their loan forgiveness amount as part of their application, although the SBA is entitled to request information and documents during its loan review process. Instead, borrowers are required to certify that the PPP funds were used for eligible payroll and nonpayroll costs, that the 60 percent payroll requirement has been met, and that an owner-employee has not received compensation above the previously established limits.

Borrowers eligible to use Form 3508S must still submit documents supporting how the funds were spent for payroll and nonpayroll costs. In addition, borrowers must maintain certain documentation supporting their forgiveness application for six years after the date forgiveness is granted.

Applications for Other PPP Borrowers

Borrowers that are not eligible to use Form 3508S may use Form 3508, which can be used for all loan sizes, or Form 3508EZ, which is available for (1) self-employed individuals, independent contractors, or sole proprietors who have no employees; (2) borrowers that did not reduce their employees’ salaries by more than 25% and did not reduce the number of hours of their employees during the covered period; or (3) borrowers that did not reduce the salaries or wages of their employees by more than 25% and were unable to operate at the same level of business activity as prior to February 15, 2020, as a result of governmental health directives related to COVID-19.


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