Paycheck Protection Program Loan Forgiveness Updates – November 2020

By Billy Litz, CPA

The Small Business Administration (SBA) and the U.S. Treasury Department recently released a simplified two-page loan forgiveness application and issued an Interim Final Rule (IFR) for recipients of Paycheck Protection Program (PPP) loans of $50,000 or less. The IFR provides new guidance concerning forgiveness and loan review processes. Below are some highlights of this issuance:

    • You are no longer required to reduce forgiveness if you reduce the wages of employees during the loan cover period compared to the reference period.
    • Your paycheck protection loan forgiveness will not be reduced if you reduce the number of full-time equivalent employees.
    • Borrowers that use the new form aren’t required to show the calculations used to determine their loan forgiveness amount.
    • The new form requires less documentation – borrowers that use the new forms are advised to keep all documentation relating to their PPP loan but are not required to submit all of the materials with their application.

( IFR link – https://home.treasury.gov/system/files/136/PPP–IFR–Additional-Revisions-Loan-Forgiveness-Loan-Review-Procedures-Interim-Final-Rules.pdf )

Which Forgiveness application should you use?

There are now three different PPP forgiveness application forms, each with its own set of instructions. They are:

    • Form 3508S – Designed for borrowers with $50,000 or less in loans- So long as the total loan amount is under $2 million in aggregate with affiliates.

Form 3508S Application

Form 3508S Instructions

    • Form 3508 – All borrowers can use this form:

Form 3508 Application

Form 3508 Instructions

    • Form 3508 EZ – Borrowers must satisfy one of the following criteria to use the EZ form:
      • Self Employed Individuals, Independent contractors, or self-proprietors who had no employees at the time of the PPP loan application OR
      • Did not reduce annual salary or hourly wages of any employee by more than 25% during the covered period or alternative payroll covered period and did not reduce the number of employees between January 1st, 2020, and the end of the covered period OR
      • Did not reduce annual salary or hourly wages of any employee by more than 25% during the covered period or the alternative covered period AND was unable to operate during the covered period at the same level of business activity as before February 15, 2020, to compliance with Covid-19 requirements or guidance.

Application for Form 3508 EZ

Instructions for Form 3508 EZ

When are the applications due?

All three PPP Loan forgiveness applications displayed an expiration date of 10/31/2020, which caused some confusion. Based on the FAQ (click here to read), the borrowers may submit the application any time before the maturity date of the loan. However, if a borrower does not apply for forgiveness within 10 months after the end of their covered period, the borrower must begin making payments on their loan.

Loan Necessity Questionnaire

Additionally, the SBA (via lenders) has begun to issue a PPP Loan Necessity Questionnaire to businesses that received PPP loans over $2 million. The questionnaire will be used by SBA loan reviewers to evaluate the good-faith certification that these businesses made on their applications regarding the necessity of the loan due to economic uncertainty. For those businesses that receive this questionnaire, it is due (along with supporting documentation) within 10 business days from receipt from the lender.

As always, if you have any questions about the Paycheck Protection Program Loan, or your loan forgiveness calculation, please do not hesitate to reach out.

Disclaimer: Please note this article is based on the information that is currently available and is subject to change.