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October 19, 2020

Simplified PPP Forgiveness Form 3508S

Simplified PPP Forgiveness Form 3508S

Recipients of PPP loans can now apply for forgiveness using the simplified PPP forgiveness Form 3508S if they borrowed $50,000 or less. This form was just released by the treasury and the SBA on October 8, 2020. It provides new guidance on the forgiveness and loan review processes for all PPP loans of $50,000 or less.

Under the Interim Financial Rule (IFR), PPP borrowers of the said amount or less are exempted from loan reductions in forgiveness based on:

  • Reductions in employee salaries or wages
  • Reductions in full-time-equivalent employees

The new SBA Form 3508S enables small to midsized businesses to apply for forgiveness for their PPP loans. If such borrowers, plus their affiliates, received the loans amounting to about $2 million or more they are disqualified from using form 3508S. These guidelines are clearly stated on the instructions for the SBA Form 3508S. These guidelines were released with the new directive.

Current stats show that of the 5.2 million loans approved by the SBA, over 3.57 million were in the range of $50,000 or less. In total, these loans amounted to about $62 billion of the total $525 billion in PPP loans. Of this, about 1.71 million PPP loans of $50,000 and below were made out to businesses that have zero or close to no employees.

Certainly, borrowers of PPP loans of $50,000 and below must still make some certifications. They must also provide lenders with some documentation for payroll and non-payroll costs.

Defining the Paycheck Protection Program (PPP)

The Paycheck Protection Program is a loan program that was established to help small to medium businesses stay afloat and keep paying their workers during the pandemic. Also, businesses covered included sole proprietors, self-employed workers, tribal businesses, and certain non-profit organizations. The Paycheck Protection Program allowed businesses to apply for low-interest loans use for their payrolls. Such PPP loans could also be used to cover rent, utilities, and other interests touching on businesses.

Lenders are obliged to partially or fully forgive these loans if borrowers keep their employee counts and maintain their employee wages. The program was established in 2020 and used to help small and midsized businesses stay afloat amidst the Covid-19 crisis.

Requirements to qualify for PPP loan forgiveness form 3508S

To qualify to use the Simplified PPP forgiveness Form 3508S application, you must fill out the following loan details:

  • The PPP loan amount
  • SBA and lender loan numbers
  • PPP loan disbursement date
  • Economic Injury Disaster Loan advance amount and application
  • Employees at the time of loan application and during the time of forgiveness application
  • Forgiveness amount

Borrowers must then certify that they meet all the Simplified PPP loan forgiveness requirements to qualify for loan forgiveness.

Lender responsibilities regarding PPP loan forgiveness

The Interim Final Rule (IFR) set guidance on lender responsibility for PPP loans of all sizes. This was done to review the borrower’s documentation of eligible costs for forgiveness in excess of their PPP loan amount.

When a borrower submits Form 3508S, the lender would be required to:

  • Confirm the receipt of the certifications in the form
  • Confirm the receipt of the documentation the borrower must submit to aid to verify payroll and non-payroll costs

The borrower would be responsible for providing accurate calculations of the loan forgiveness amounts. She must also attest to the accuracy of the reported calculation and any information on their loan forgiveness application. According to the IFR, lenders are allowed to rely on the borrower’s representations.

The IFR addresses all the lender’s responsibilities should the borrower submit documentation of eligible costs exceeding the borrower’s PPP loan amount. This amount cannot exceed the borrower’s initial amount of the PPP loan.

How to apply for PPP loan forgiveness using the Simplified PPP forgiveness form 3508S

Whether the borrower submits SBA Forms 3508, 3508S, or 3508EZ, or a lender’s equivalent form, it’s the lender’s responsibility to acknowledge receipt of the documentation.

This action by the IFR streamlines the loan forgiveness process of the Simplified Paycheck Protection Program. And this has been made possible on PPP under $50,000 toward the benefit of thousands of PPP lenders who strived to have their loans processed quickly.

Steven Mnuchin, the Treasury Secretary, also expressed his team’s commitment towards making the PPP loan forgiveness process as very simple. He insisted on it being straightforward while protecting against misuse of funds and fraud. According to Steven, the Treasury would continue to favor any additional legislation and directives to simplify the forgiveness process further.

Current PPP Situation in Brief

The SBA only just released another simplified application known as the SBA Form 3508S on October 5th, 2020, along with detailed instructions for its use. As with Form 3508, this form is only applicable if the lender’s PPP loan amount received by the borrower was $50,000 or less.

On the other hand, any borrower who received PPP loan amounts totaling $2 million or more cannot use the Form 3508S. These borrowers must use Form 3508 or Form 3508EZ or the lender’s equivalent form.

Any borrower who qualifies for and uses the 3508S is also exempted from any form of reductions in the borrower’s loan forgiveness amounts. This is based on reductions in FTE employees or employee salaries from the CARES Act.

The SBA Form 3508S doesn’t require borrowers to provide the calculations they used to find their loan forgiveness amounts. Nevertheless, the SBA may request that you provide documentation and other information to review those calculations. The borrower is also expected to retain all documentation that:

  • Was submitted with the loan application
  • Proves the borrower’s certification of eligibility for the loan and material compliance with PPP’s requirements
  • Backs up the loan forgiveness application.

 Such documents are to be retained for six years from the date of repaying or forgiving the loan.

As a borrower, you can submit the application for forgiveness electronically. Be sure to submit it within ten months after the expiry of the loan-covered period to the lender servicing your loan.

EZ Application for Forgiveness to Avoid Data-Intensive Calculations

The latest streamlined loan forgiveness application, Form 3508EZ, and its related instructions are the current most significant simplification forms of the PPP loan.

This new simplified PPP loan forgiveness form 3508S should eliminate the need to collect several counts of FTE employees provided either of these statements are applicable:

  • The borrower doesn’t produce the number of employees or average pay hours of employees between January 1st, 2020, and February 15th, 2020, the end of the Covered Period. If the borrower could not hire similarly qualified employees for any unfulfilled positions by December 31st, 2020, and corresponding reductions in each employee’s hours that the borrower offered to restore but was refused.
  • The borrower could not operate optimally between February 15th, 2020, and the end of the Covered Period. This may be due to compliance with the Secretary of Health and Human Services’ guidance and requirements between March 1st, 2020, and December 31st, 2020. This also included directives by the Occupational Safety and Health Administration and the Director of the Centers for Disease Control and Prevention. These guidelines were issued to maintain standards of social distancing, sanitation, and any other customer safety requirements related to the Coronavirus.

Borrowers using the SBA Form 3508EZ will still be required to submit the number of their employees up to the time of the loan application and forgiveness application dates. However, this should be a much easier tally compare to undertaking the FTE counts.

About the Small Business Administration

The U.S. Small Business Administration helps make the American dream of business ownership and maintenance a reality again. As the current only go-to resource and voice for small and midsized businesses, the SBA helps empower small entrepreneurs with the support and resources they need to recover, grow, and expand from the current disaster.

The Simplified Paycheck Protection program delivers services through SBA field offices and partnerships using both public and private organizations.

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Felix Mwania

I live in the intersection of technology and entrepreneurship. I am a technology enthusiast but my passion is helping small businesses succeed, including mine.

When I am not working, you will find me goofing with my wife and kids. When not with family and/or friends, you will find me doing some home improvement projects.

Felix Mwania


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