The U.S. Small Business Administration, in consultation with the Treasury Department, has released a simpler loan forgiveness application for Paycheck Protection Program (PPP) loans.
“Today’s action streamlines the forgiveness process for PPP borrowers with loans of $50,000 or less and thousands of PPP lenders who worked around the clock to process loans quickly,” Treasury Secretary Steven Mnuchin said in an Oct. 8 statement.
Borrower can apply for forgiveness of their PPP loan using SBA Form 3508S only if the total PPP loan amount received from their lender was $50,000 or less. However, a borrower that, together with its affiliates received PPP loans totaling $2 million or more cannot use this form, according to the application instructions.
As part of the release of the new application, the SBA and Treasury also released an updated interim final rule to provide additional guidance concerning the forgiveness and loan review processes for PPP loans of $50,000 or less and, for PPP loans of all sizes, lender responsibilities with respect to the review of borrower documentation of eligible costs for forgiveness in excess of a borrower’s PPP loan amount.
The SBA began approving PPP forgiveness applications and remitting forgiveness payments to PPP lenders for PPP borrowers on Oct. 2, 2020. The SBA says that it intends to process all PPP forgiveness applications in an “expeditious manner.”
In general, borrowers are eligible for forgiveness for the payroll costs paid and payroll costs incurred during the 24- or 8-week Covered Period or Alternative Payroll Covered Period. The Covered Period is either:
- the 24-week period beginning on the PPP Loan Disbursement Date; or
- if the Borrower received its PPP loan before June 5, 2020, the Borrower may elect to use an 8-week Covered Period.
In no event may the Covered Period extend beyond Dec. 31, 2020.
According to the Interim Final Rule, there are approximately 3.57 million outstanding PPP loans of $50,000 or less, totaling approximately $62 billion of the $525 billion in PPP loans. Of these, approximately 1.71 million were made to businesses that reported having zero employees or one employee. To the extent that these businesses have no employees other than the owner, the SBA notes that they would not be eligible for the simplified exemption. As a result, based on available data, the agency estimates that the outstanding PPP loans of the relevant set of potentially affected borrowers total approximately $49 billion, or 9% of the overall PPP loan amount.
Overall, the PPP has provided 5.2 million loans worth $525 billion to American small businesses, supporting more than 51 million jobs.
The Treasury Secretary further noted in the Oct. 8 statement that the department favors additional legislation to further simplify the forgiveness process. But it doesn’t appear that lawmakers are any closer to reaching an agreement on a follow-up COVID-19 economic relief bill. In an Oct. 11 letter to members of the House and Senate, Secretary Mnuchin and White House Chief of Staff Mark Meadows called on Congress to vote on a bill to allow the use of unused Paycheck Protection Program funds while work continues toward a comprehensive package.
Elements of the new process are online:
