Small Business Administration & Treasury Release Simplified Forgiveness for Small PPP Loans

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The U.S. Treasury and Small Business Administration (“SBA”) recently issued updated guidance for small businesses that borrowed $50,000 or less under the Paycheck Protection Program (“PPP”). Business owners with PPP loans that are below this threshold may be eligible to complete the simplified SBA Form 3508S when applying for loan forgiveness.  Borrowers that, together with affiliates, received PPP loans totaling $2 million or greater are not eligible to use the simplified form.

PPP is part of the Coronavirus Aid, Relief, and Economic Security (CARES) Act and authorized the U.S. Treasury to fund loans for qualifying businesses to help cover costs including payroll, mortgage interest, rent and utilities in response to the pandemic. As part of the program, a qualified borrower is eligible for forgiveness of loans received. According to Treasury Secretary Steven T. Mnichin, “[The Treasury Department] is committed to making the PPP forgiveness process as simple as possible while also protecting against fraud and misuse of funds.” SBA Form 3508S has eliminated worksheets and calculations required for the application of forgiveness. The new form requires information identifying the borrower, the amount of loan forgiveness requested and requires the borrower to confirm certain representations and certifications, as well as provide supporting documentation.

There are some exceptions to the use of the new form so borrowers should be aware that the new simplified form may not available to businesses that reduced their staff or reduced salary or hourly wages by more than 25 percent. In such cases, borrowers may be required to use the standard PPP forgiveness application.

In addition to a simplified form, the loan forgiveness process for lenders is streamlined as well. Per the SBA and Treasury Department’s Interim Final Rule, “the lender shall: (i) confirm receipt of the borrower certifications contained in the SBA Form 3508S or lender’s equivalent form [and] (ii) confirm receipt of the documentation the borrower must submit to aid in verifying payroll and non-payroll costs, as specified in the instructions to the SBA Form 3508S or lender’s equivalent form.” It is the responsibility of the borrower to provide an accurate calculation of the loan forgiveness amount and the borrower attests to the accuracy of its reporting on the form. The borrower will not receive forgiveness without submitting all required supporting documentation. Lenders do not need to independently verify the borrower’s reported information so long as the borrower submits the required supporting documentation and attests to its accuracy.

This simpler, streamlined process allows small business owners to apply for forgiveness without embarking on a time-consuming, costly process and requires fewer calculations and less documentation for eligible borrowers. For more information and links to the form and instructions, please visit https://home.treasury.gov/news/press-releases/sm1148.

For questions about this article  or any other business matter, please contact an attorney in our Business & Transactional practice group.