If you received a loan totaling $50,000 or less through the Paycheck Protection Program, the administrative burden associated with applying for forgiveness is now much lighter. The Small Business Administration recently issued Form 3508S, which is a far simpler loan forgiveness application, especially in comparison to the original 3508 form and even the 3508EZ form. For example, Form 3508S is a single page and requires very little paperwork when applying for PPP loan forgiveness. Small business owners who borrowed $50,000 or less will need to certify the following:
- Loan funds were used for eligible expenses;
- Payroll costs were at least 60 percent of the forgiveness amount; and
- You meet the owner-employee’s limitations and caps.
In addition, PPP loan borrowers also need to provide some form of documentation supporting the eligible payroll and nonpayroll payments from the covered period, including:
- Payment receipts, cancelled checks, or account statements documenting the amount of employer contributions to employee benefit plans;
- Copies of lender amortization schedules and receipts or cancelled checks verifying eligible payments from the covered period;
- Business rent or lease payments; and
- Business utility payments.
The supporting documentation will need to be retained for six years after the date your PPP loan is forgiven or repaid in full.
The SBA anticipates that this new form will enable almost 70 percent of PPP loans to be easily forgiven. The SBA arrived at this conclusion because, out of a total of 5.2 million PPP loans that the agency approved, around 3.5 million loans were in amounts of $50,000 or less.
The SBA also issued guidance advising that small businesses with no employees or businesses where the owner is the only employee, can now have most, or all, of their PPP loan forgiven. Additionally, the SBA issued a new rule also relaxes the scrutiny requirements on lenders to review documentation from small businesses proving how the money was spent.
The new forgiveness form and guidance from the SBA was met with much fanfare in the business community since many small businesses have been reticent to spend much, if any, money to grow their business due to concerns with the PPP loan hanging over their heads. Relieving businesses of the loan burden could now enable them to actually spend and take more risk at went enter the final months of 2020. However, the SBA points out there’s no guarantee and is still pushing for continued support from Congress in the next stimulus bill. In addition, it is pushing for the SBA to extend the new guidance to loan $150,000 or less.
Have Questions? Contact InSight Law
If you need assistance with how to navigate the complexities of the PPP loan forgiveness process, InSight Law is here to help. Contact our office today to speak to an experienced attorney.