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SBA Offers Simple Forgiveness Application for Paycheck Protection Program Loans of $50,000 or Less

On October 8, 2020, the Small Business Administration and Treasury released a new, simpler loan forgiveness application for Paycheck Protection Program (“PPP”) borrowers with loans of $50,000 or less. The new process for smaller loans will reduce the burden on both small business borrowers and their lenders. The SBA announcement, new form, instructions, and a new interim final rule can be found here.

The simple form, SBA Form 3508S, requires far fewer calculations and less documentation than the previously released regular and “EZ” forms. Borrowers using the simple form are not required to show the calculations used to determine their loan forgiveness amount. Nevertheless, borrowers are still required to submit documentation to their lenders of their payroll and non-payroll costs such as bank statements, tax forms, lease agreements, and invoices.

Under a new de minimis exemption, borrowers using Form 3508S are exempt from reductions in loan forgiveness based on reductions in workforce, salaries or wages. Borrowers using the simple form are therefore not required to submit documents relating to such reductions.

The new interim rule makes clear that a PPP lender receiving a simple forgiveness application is responsible only for confirming receipt of the borrower’s certifications on the form and confirming receipt of the required documentation on payroll and non-payroll costs. The PPP borrower is responsible for the accuracy of its loan forgiveness calculations.

PPP borrowers are required to retain all records relating to PPP loans for six years, including documentation supporting forgiveness applications, eligibility certifications, and compliance generally. Borrowers are required to grant SBA officials access to this documentation upon request.

The simple forgiveness form may not be used by any borrower that, together with its affiliates, received PPP loans totaling $2 million or more.

The SBA reports that there are over 3.5 million outstanding PPP loans of $50,000 or less, suggesting that the new simple form will be welcomed by many small business borrowers and their lenders across the United States.

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This information is provided by Vinson & Elkins LLP for educational and informational purposes only and is not intended, nor should it be construed, as legal advice.