New SBA guidance for forgiveness of PPP loans of $50,000 or less

Finance to Table Education for Operating Your Restaurant

On October 8, 2020, the SBA jointly with Treasury issued an interim final rule providing additional guidance concerning the forgiveness and loan review process for PPP loans of $50,000 or less.

The interim final rule should result in a simpler forgiveness and loan review processes for loans of $50,000 or less by exempting the borrower from any reductions in the borrower’s loan forgiveness amount based on reductions in FTE’s (full-time equivalent employees) or reductions in salaries or wages of employees.

Don’t miss: Which 401(k) plan makes the most sense for your restaurant?

To meet these new requirements, the SBA issued on October 8, 2020 a new loan forgiveness application, SBA Form 3508S along with instructions on completing this new form.  As a result, there are now three different loan applications (SBA Form 3508, 3508EZ and 3508S) that borrowers will need to review and determine the appropriate one to use. Please note that a lot of lenders may be providing their own lender equivalent form to complete, so check with you banker before completing any loan forgiveness application.

There are 3.57 million outstanding PPP loans of $50,000 or less, totaling approximately $62 billion of the $525 billion in PPP loans issued. Of these loans that are less than $50,000, approximately 1.71 million loans of $50,000 or less were made to business that reported having zero (not counting the owner as an employee) or one employee.  Hence, the SBA believes the loans that could potentially be impacted by this interim final rule total approximately $49 billion, or 9% of the overall PPP loan amount. They also believe that most of these loans would not be affected by the loan forgiveness reduction as these borrowers did not reduce their FTE count or salaries or wages and as a result the total dollar amount of loans impacted by this interim financial ruled would be deemed to be de minimis.

When submitting the loan application 3508 to the lender, the lender must confirm receipt of the borrower’s certifications contained in the Form 3508S and confirm receipt of the documentation the borrower must submit to aid in verifying payroll and nonpayroll costs. Providing an accurate calculation of the loan forgiveness amount is the responsibility of the borrower and the borrower must attest to the accuracy of the reported information and calculations.  The borrower shall not receive forgiveness without submitting all required documentation. The lenders may rely on borrower representations and the lender does not need to independently verify the borrower’s reported information if the borrower submits documentation supporting its requests for loan forgiveness and attests to its accuracy.

If you have questions or need assistance with filing your application for forgiveness of your PPP loans, please do not hesitate to reach out to one of our restaurant team members for help!

Contact your Henry+Horne tax professional for more details. For more information and resources on COVID-19, see our coronavirus page.

Brian Campbell, CPA