New $50,000 and Under Streamlined Loan Forgiveness Application Process:
On Thursday 10/8/20, the Small Business Administration released a much-anticipated, streamlined loan forgiveness application for Paycheck Protection Program loans totaling $50,000 or less. The new rule provides a two-page SBA Form 3508S forgiveness application that does not require calculations to be submitted with the application. Any borrower that uses the SBA Form 3508S is exempt from any reductions in the borrower’s loan forgiveness amount based on reductions in full-time equivalent (FTE) employees or reductions in the employee salary or wages that would otherwise apply. The borrower still must provide all supporting documentation to the lender that is outlined on the application instructions.
For United Bank PPP borrowers - payment guidelines:
While your PPP note may state a payment date seven (7) months from your loan date, newer legislation was passed deferring those payments, as long as a timely loan forgiveness application is received. Based on this guidance, United Bank has automatically deferred all payments until one year from your original loan date. You do not have to sign a note modification or take any further action. Once the forgiveness application is received and processed, the payment due date may be revised at that time.
On June 5, 2020, the Paycheck Protection Program Flexibility Act (PPPFA) became law. Below are some highlights regarding how the PPPFA affects your PPP loan.
- Borrowers may choose to apply for forgiveness of qualifying expenses incurred during a 24-week “covered period” after their loan was disbursed. The previous law limited forgiveness to expenses incurred during the eight weeks following loan disbursement. Borrowers may still apply for forgiveness pursuant to the eight-week covered period, unless they applied on or after June 5.
- The deferral period, during which no payments of principal or interest are required, has been extended to the earlier of (a) the date when United Bank receives payment of the loan forgiveness amount from the Small Business Administration (SBA), or (b) ten months after the end of the “covered period.” The previous law required a six-month deferral period.
- Forgivable expenses must consist of at least 60% payroll costs (the previous law required that at least 75% of the requested forgiveness amount consist of payroll costs). This change should help more borrowers obtain full loan forgiveness.
- The PPPFA did not change the maturity date of existing loans. Those loans will continue to have a two-year maturity.
The SBA has provided two applications for PPP Forgiveness for loans greater than $50,000: Form 3508 and Form 3508EZ. The three-page EZ form requires less documentation and fewer calculations and applies to borrowers who meet any one of the following criteria:
- You applied for the PPP loan as self-employed, an independent contractor or a sole proprietor with no employees
- You did not reduce salary or wages for any employee by more than 25%, and did not reduce the number of employees (except laid-off employees who refused your offer to return)
- You did not reduce salary or wages for any employee by more than 25% during the covered period and experienced reductions in business activity as a result of COVID-19 health directives
If you do not meet any of the above criteria, you must complete Forgiveness Form 3508.
The Treasury Department has posted PDF documents providing instructions for completing the applications, along with lists of the documents that must be submitted and others that must be maintained.
This process continues to evolve. Additional guidance may be released at any time from the SBA, and all guidance is subject to change. The above summary of PPPFA is not a substitute for the more detailed instructions and procedures found on this Treasury website link.