The U.S. Small Business Administration (SBA) issued additional guidance on Paycheck Protection Program (PPP) Loan forgiveness through issuing of:
Final Frequently Asked Questions (FAQs) as of October 7, 2020
Interim Final Ruling (IFR) on Additional Revisions to Loan Forgiveness and Loan Review Procedures (10/8/2020)
The key takeaways to highlight are:
Clarification on Deferral Period
The PPP Flexibility Act extended the deferral period for borrower payments of principal, interest, and fees on all PPP loans to the date that SBA remits the borrower’s loan forgiveness amount to the lender (as long as the borrower applies for loan forgiveness within 10 months after the end of the borrower’s covered period).
The extension of the deferral period automatically applies to all PPP loans. Lenders are required to give immediate effect to the statutory extension and should notify the borrowers of the change to the deferral period. The SBA does not require a formal modification to the existing promissory note.
Simplified Application for Borrowers with PPP Loans Less than $50,000
Borrowers with PPP loans of less than $50,000 are now eligible to use a simplified application to apply for forgiveness. Under the IFR, these borrowers are exempt from reductions in forgiveness based on:
Reductions in full-time-equivalent (FTE) employees; and
Reductions in employee salary or wages.
The new simplified application – SBA Form 3508S – can be used by PPP borrowers with a total loan amount of $50,000 or less, unless those borrowers together with their affiliates received loans totaling $2 million or more.
Borrowers are responsible for self-certifying the accuracy of the calculation of the loan forgiveness amount. Lenders are permitted to rely on borrower representations.
The IFR clarifies that the amount of loan forgiveness a borrower may receive cannot exceed the principal amount of the PPP loan, even if they submit documentation of eligible costs that exceed the borrower’s PPP loan amount.
The SBA clarified that forgiveness applications are not due on October 31, 2020, despite a display in the upper right corner of the current applications (SBA Form 3508, 3508EZ and 3508S) stating expiration on October 31, 2020.
Borrowers may submit a loan forgiveness application any time before the maturity date of the loan – which is either two or five years from the loan’s origination, depending on the borrower’s agreement – but loan payments are deferred only for 10 months after the borrower’s loan forgiveness covered period.
PPP Loan Forgiveness Assistance
blum has been on the forefront of interpreting PPP guidance and providing trusted resources for clients to keep them apprised of constant changes and providing the most up-to-date information to assist in calculating loan forgiveness. Our team is working with clients to assist them with navigating through compliance requirements of the loan forgiveness program, to ensure forgiveness is received, help expedite the loan forgiveness process and provide a reliable and trusted source of information.