U.S. Small Business Administration Publishes PPP Loan Forgiveness Application

U.S. Small Business Administration Publishes PPP Loan Forgiveness Application

Late in the day Friday, May 15, 2020 the U.S. Small Business Administration published SBA Form 3508 – Paycheck Protection Program Loan Forgiveness Application.

This 11-page document provides a series of instructions, worksheets, and borrower representations/certifications for borrowers to complete and submit to their lender to receive partial or full forgiveness of their PPP Loan proceeds. 

This document provides additional clarity on some, but certainly not all, PPP loan forgiveness issues and is designed to reduce compliance burdens and simplify the forgiveness application by including the following:

• An alternative option for calculating payroll costs using an “alternative payroll covered period” that aligns with a borrower’s regular payroll cycle.

• Flexibility to include eligible payroll and non-payroll expenses paid or incurred during a borrower’s eight-week covered forgiveness period.

• Step-by-step instructions on how to perform the calculations required by the CARES Act to confirm eligibility for loan forgiveness.

• Borrower-friendly implementation of the statutory exemptions from loan forgiveness reductions, including a “safe harbor” based on rehiring employees by June 30, 2020.  

• Addition of a new exemption from the loan forgiveness reduction for borrowers who have made good-faith, written offers to rehire workers and were declined or, who have other former employees who departed under certain conditions.

• A description of many of the documents that will need to be submitted in support of a forgiveness application.

Some of the More Significant Provisions are Highlighted Here

Alternate Payroll Covered Period

• For administrative convenience, borrowers with a biweekly, or more frequent payroll schedule, may elect to calculate eligible payroll costs using the eight-week (56-day) period that begins on the first day of their first pay period following their PPP Loan Disbursement Date (Alternative Payroll Covered Period).

• Borrowers who elect to use the Alternative Payroll Covered Period MUST apply the Alternative Payroll Covered Period wherever there is a reference in this application to the Covered Period or the Alternative Payroll Covered Period. 

• Borrowers must apply the Covered Period (not the Alternative Payroll Covered Period) wherever there is a reference in this application to the Covered Period only.

• Payroll costs incurred but not paid during the Borrower’s last pay period of the Covered Period (or Alternative Payroll Covered Period) are eligible for forgiveness if paid on or before the next regular payroll date.

Eligible Non-Payroll Costs

• Non-payroll costs must be paid during the Covered Period (or incurred during the Covered Period and paid on or before the next regular billing date) even if the billing date is after the Covered Period.

• Eligible non-payroll costs cannot exceed 25% of the total forgiveness amount.

• Count non-payroll costs that were both paid and incurred only once.

• The applicant is not required to report payments that the applicant does not want to include in the forgiveness amount (i.e. To avoid violation of the 75%/25% ratio of payroll to non-payroll expenditures).

Certifications Required by Borrower

• The Borrower must certify that they received PPP Loans in Excess of $2 Million (including affiliates), if applicable.

• An affiliate is an entity which is owned or controlled 50% or more by a person or entity.

• Control is met by ownership or determined by common management.

• Control is also met through family attribution including:

  • married couples

  • parents

  • children

  • siblings

• Control is also met when there are members with common investments or entities which are economically dependent to each other through contractual relationships (common contracts, employee’s, or facilities).             

As with all other provisions of PPP Loan Program there are many other details that apply to effectively manage the Paycheck Protection Program Loan Forgiveness application that we are not able to cover here. Please reach out to your FMD professional advisor as soon as possible to discuss this process so that you are prepared when it is time to make your application for forgiveness.

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