Finally! The SBA Releases One-Page PPP Loan Forgiveness Application

The Small Business Administration (SBA) released a slew of PPP guidance and updates yesterday, including the new simplified, one-page application for borrowers of loans for $150,000 or less – Form 3508S. Before the program reopened that threshold covered about 4.6 million of the program’s total 5.2 million loans.

Small loans predominate in the new round of PPP loans opened up last week, too. According to the information released yesterday, the SBA approved 60,000 paycheck protection loans submitted to nearly 3,000 lenders for over $5 billion between Monday January 11^th and Sunday January 17th. That was the week set aside for community financial institutions that specialize in serving underserved communities. As of yesterday, PPP was open to all lenders.

These figures suggest that, overall, smaller borrowers are having an easier time getting funds. The new forgiveness application make PPP even more attractive to struggling businesses by streamlining the process for getting loans forgiven. Here’s a in-depth look at the app.

Identifying Information

The loan application is shorter and easier to complete than ever. It’s only one page long, and, significantly, it no longer requires you to show the calculations you use to determine how much of your loan should be forgiven.

The first section asks for identifying information, including, for the first time, your NAICS code (or industry classification). This is especially important for borrowers with code beginning with 72 — that’s restaurants, hotels, food service and hospitality. For companies in these industries, the maximum loan amount is 3.5 times average monthly payroll, rather than 2.5 times average monthly payroll. There’s one other significant change. The application no longer requires information from your Economic Injury Disaster Loan (EIDL) advance. These funds were originally supposed to offset your forgiveness amount but no longer do so.

You’ll have to gather other information, as well, including:

• SBA PPP Loan Number (the loan number assigned by the SBA at the time of approval)
• Lender PPP Loan Number (the loan number assigned to the PPP Loan by your lender)
• PPP Loan amount
• PPP Loan disbursement date
• Employees at the time of loan application
• Employees at the time of forgiveness of the application
• The covered periods (this is the eight- to 24-week period following the disbursement of the loan)
• Amount of Loan Spent on Payroll Costs
• Requested Loan Forgiveness amount

Can’t find or don’t have your SBA or Lender Loan number? Your bank should provide you with it or complete that portion for you.

The Certifications

Next you have two certifications.

The first certifies that you complied with all PPP rules, including:

• Eligible uses of PPP loan proceeds (remember this list was recently expanded)
• The amount of PPP loan proceeds that must be used for payroll (at least 60% of the requested loan forgiveness amount)
• The calculation and documentation of your revenue reduction (if applicable), and
• The calculation of your loan forgiveness amount.

Again, the key here is that you are certifying that you did these things, but you don’t have to show the work behind them.

The second certification is that the information you provide is true and correct “in all material aspects.” Knowingly making a false statement could result in up to five years in prison and/or a fine up to $250,000. If you deceive a federally insured institution, that increases to up to 30 years and or a fine of not more than $1,000,000.

After you completed those steps, you sign and print your name, date it and you’re ready to apply.

Borrower beware

The new application is significantly simpler, but there are still several things to keep in mind.

First, you must retain your records to prove compliance for four years for employment records and three years for other records. The clock starts running on the day you submit the application to your lender. Additionally, the SBA can ask for additional documentation if necessary.

Second, it’s very important to answer the form’s demographic questions, so that we can track PPP’s impact on minority business owners. Minority-owned companies have been disproportionally impacted by Covid-19 and haven’t had as much access to PPP funds to get them through. This information can go a long way in making sure the people who need the funds the most are getting what they need.

Third, while the SBA provides this template, your lender will likely create its own electronic version of the form for the application. Save yourself duplicated effort and don’t try to submit this paper application to your lender.

Fourth, remember thanks to the Consolidated Appropriations Act, 2021, your covered period can be anywhere from eight to 24 weeks. You’ll likely want to take the longest covered period you can so you’ll have more time to spend the money on covered expenses.

Also remember that you can use PPP in conjunction with the Employer Retention Credit (ERC), but you have to use different qualifying wages for each. In short, make sure you’re keeping track of which wages you’ve used for PPP and which wages you’d like to use for the ERC. And as with the former forgiveness applications, for each individual employee, the total amount of cash compensation eligible for forgiveness may not exceed the annual salary of $100,000 prorated for the covered period.

Fifth, if you’re not eligible for this form, you need to use the Form 3508 or 3508EZ, both of which have also been updated.

Lastly, don’t forget that borrowers who received a PPP Loan of more than $50,000 must still adjust their requested loan forgiveness amount by the dreaded FTE and salary/wage reductions. You can find the exceptions to this on page 3 of the form instructions. If you don’t qualify, you’ll have to work your way through the 3508 PPP Schedule A worksheet for the calculation But, as a reminder, while you may need to do the calculations, you don’t need to submit them with the forgiveness application. But the SBA can request the information in a loan review or audit circumstance.

It will take a little longer still before lenders have updated their processes to conform with the new application, but this is a huge step forward in making the forgiveness process easier for a lot of borrowers.