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Paycheck Protection Program (PPP) Forgiveness Simplified for Smaller Loans + Excess Costs

Written by Van Trefethen on October 9, 2020

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In an effort to simplify the loan forgiveness process for certain small loans, the SBA, along with the Treasury, issued a new Interim Final Rule (IFR) on October 8, 2020. This IFR provides for a simplified loan forgiveness form along with guidelines for lenders to follow in processing these forgiveness applications.

The IFR introduced a new simplified Loan Forgiveness Application, SBA Form 3508S, for PPP loans of $50,000 or less. (If a borrower, together with its affiliates, received loans totaling $2 million or greater, they are not eligible to file SBA Form 3508S.) If a borrower completes form 3508S, the organization is exempt from a reduction in its loan forgiveness amount related to the full time equivalent (FTE) employee or the wage reduction tests.

It is important to note that borrowers are still required to submit documentation supporting their eligible expenses and to spend at least 60% of the PPP loan proceeds on eligible payroll expenses (i.e., the new application does not grant automatic forgiveness across the board for smaller loans.).

Finally, the latest IFR discussed how lenders should treat forgiveness applications in which the borrower submits to the lender documentation of eligible expenses that exceed the amount of the borrower’s PPP loan. The SBA stated:

“The amount of loan forgiveness that a borrower may receive cannot exceed the principal amount of the PPP loan. Whether a borrower submits SBA Form 3508, 3508EZ, 3508S or lender’s equivalent form, a lender should confirm receipt of the documentation the borrower is required to submit to aid in verifying payroll and nonpayroll costs, and, if applicable (for SBA Form 3508, 3508EZ, or lender’s equivalent form), confirm the borrower’s calculations on the borrower’s Loan Forgiveness Application, up to the amount required to reach the requested Forgiveness Amount.”

Based on this guidance, the SBA and Treasury do not appear to be limiting the borrower’s eligible expenses to the loan amount received.

Overall, these are positive developments within the PPP. In an effort to keep you informed, Warren Averett is continuing to monitor the guidance as it becomes available. If you have questions about how these changes impact your business, please reach out to your Warren Averett advisor, or have a member of our team reach out to you.

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