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Guidance on PPP Loans of $50,000 or Less

Gregory Pfeuffer

October 13, 2020

On October 8, 2020, the SBA issued additional guidance concerning the forgiveness and loan review processes for PPP loans of $50,000 or less. This guidance also included details on PPP loans of all sizes, and lender responsibilities with respect to the review of borrower documentation on eligible costs for forgiveness in excess of a borrower’s PPP loan amount.

The purpose of this interim final rule is to simplify further:

  1. The forgiveness and loan review processes for PPP loans of $50,000 or less, and
  2. 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.

Alternative Loan Forgiveness Application

In connection with this rule, the SBA is issuing an alternative Loan Forgiveness Application, SBA Form 3508S, for use by PPP borrowers applying for loan forgiveness on PPP loans with a total loan amount of $50,000 or less; except for those borrowers that together with their affiliates received loans totaling $2 million or greater. For a copy of the instructions to SBA Form 3508S, click here.

Loan Forgiveness Reduction Exemptions for Decreases in FTEs and Salary and Wages

A borrower that uses SBA Form 3508S (or lender’s equivalent form) is exempt from any reductions in the borrower’s loan forgiveness amount based on reductions in full time equivalent (FTE) employees or reductions in employee salary or wages that would otherwise apply.

The Loan Forgiveness Process for Lenders

When a borrower submits SBA Form 3508S or lender’s equivalent form, the lender shall:

  1. Confirm receipt of the borrower certifications contained in SBA Form 3508S or lender’s equivalent form.
  2. Confirm receipt of documentation the borrower must submit to aid in verifying payroll and nonpayroll costs, as specified in the instructions to SBA Form 3508S or lender’s equivalent form.

Providing an accurate calculation of the loan forgiveness amount is the responsibility of the borrower, and the borrower attests to the accuracy of its reported information and calculations on the Loan Forgiveness Application. The borrower shall not receive forgiveness without submitting all required documentation to the lender.

As the First Interim Final Rule indicates, lenders may rely on borrower representations. Stated in paragraph III.3.c of the First Interim Final Rule, the lender does not need to independently verify the borrower’s reported information if the borrower submits documentation supporting its request for loan forgiveness and attests that it accurately verified the payments for eligible costs.

Borrower Submission of Excess Costs

In some cases, a borrower may submit lender documentation of eligible payroll and nonpayroll costs that exceed the amount of the borrower’s PPP loan. 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.

Please refer to SBA 13 CFR Part 120 [Docket Number SBA-2020-0052] to obtain a complete understanding of the guidance.

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