$50,000 or Less in PPP – If so, you will WANT to read this!
Great news for many PPP borrowers! For quite some time, the U.S. Small Business Administration and Treasury Department have been interested in simplifying the Paycheck Protection Program (“PPP”) forgiveness process for borrowers. On October 8, 2020, the Small Business Administration released a simplified PPP forgiveness application form, Form 3508S, designed to remove the headache from many small businesses that benefited from the program. This article is written to address some of the basic questions that borrowers might have about this simplified forgiveness process.
Who can use the new form? For right now, this new application is limited to borrowers who obtained loans of $50,000.00 or less. While this restriction does still exclude many borrowers – especially those with high employee headcounts -, this new forgiveness form is a great help to sole proprietors and many of the small businesses that benefited under the program.
What information do I need to provide? Except for an optional questionnaire, Form 3508S fits on a single page. Qualifying borrowers need only to provide their contact information and details about their PPP loan, including the loan number and amount of the loan that these borrowers are seeking forgiveness for. Beyond this, borrowers will need to represent that they used their PPP funding on qualifying expenses, including payroll, mortgages, rent, and utilities.
What’s the catch? Like previous PPP forgiveness forms, borrowers are still required to send documentation proving that they spent their PPP funding on approved expenses. For small businesses using a third-party payroll service, their payroll providers should be equipped to provide all of this information. For others, small businesses will need to provide bank account statements and tax forms that demonstrate how much of their PPP funding went toward payroll. For qualifying non-payroll expenses including mortgage interest payments, leases, and utilities, borrowers will also need to demonstrate that these obligations existed prior to February 15, 2020. For mortgagors, this means providing a copy of the loan’s amortization schedule and proof of payment. For leases and utilities, borrowers will need to provide copies of invoices from February 2020 through the end of the covered period.
Final thoughts In conclusion, Although form 3508S does not address all the concerns that businesses may have about the PPP forgiveness process, the SBA is moving in the right direction as the Agency recognizes that for the many businesses affected by the pandemic, there is confusion around the forgiveness process that has not yet been addressed. With this first step toward uncomplicating the forgiveness process, we believe the Small Business Administration and the Treasury Department are moving in the correct direction. NOTE: It is still possible for “automatic forgiveness” under the proposed HEROES Act (if and when Congress acts). FOR MORE QUESTIONS, PLEASE CONTACT WEISS LLP.