SBA PPP: Simplified Forgiveness Application for Small Loans

On October 8, 2020, the Small Business Administration (“SBA”) published its twenty-fifth Interim Final Rule related to the forgiveness of certain loans made pursuant to its Paycheck Protection Program (“PPP”). PPP loans of $50,000 or less will benefit from a simpler application and exemptions from certain requirements imposed on borrowers.

Specifically, the 25^th IFR exempts loans of $50,000 or less from the full-time equivalent (FTE) employee reduction penalty and the employee salary and wage reduction penalty. To implement these simplifications, the SBA published a third forgiveness application, referred to as SBA Form 3508S. (The other two forgiveness applications, the regular Loan Forgiveness Application and EZ Loan Forgiveness Application, remain unchanged.)

The SBA has reported approximately 3.57 million outstanding PPP loans of $50,000 or less, meaning this exemptions should provide relief for more than half of the PPP borrowers. The 25^th IFR also simplifies the lender responsibilities related to borrower documentation for loans of all sizes.

Relatedly, on October 13, the SBA published General Loan Forgiveness FAQ #4, which is a part of a series of FAQs published in August that focus on forgiveness. These FAQs are separate from the FAQs that have been regularly updated since April. General Loan Forgiveness FAQ #4 clarified that the October 31 expiration date displayed on the applications is not a deadline, but merely reflects a temporary expiration date that the SBA assures will be extended. General Loan Forgiveness FAQ #4 also reminds borrowers that they must apply for loan forgiveness within 10 months following the last day of the their covered period to avoid needing to make loan payments.

The SBA began approving forgiveness applications on October 2, 2020 and the United States Department of the Treasury has asserted in a press release it will process all PPP forgiveness applications in an expeditious manner.

When analyzing eligibility, compliance, or other issues related to the PPP loans, both lenders and borrowers should ensure they have consulted the proper sources. We encourage you to consult the other articles we have published regarding PPP loans, which can be found on our COVID-19 Hub. If you have any questions regarding the SBA PPP loans, or other aspects of the CARES Act, please contact a Baird Holm LLP attorney.