Published December 2, 2020

The Road to Greater Clarity — Developments in PPP Loan Forgiveness

The Small Business Administration (SBA) released an Interim Final Rule (Rule) providing additional clarification specific to the loan forgiveness application process for those businesses that received Paycheck Protection Program (PPP) funds. This action represents a small step on the road to greater clarity for many that received a lifeline in the form of a PPP loan. The Rule clarifies two major items.

  1. PPP-Eligible Costs

As the timeframe available to use PPP funds was extended for a 24-week period, many businesses have appropriately used the monies for either payroll or nonpayroll costs in excess of the original PPP loan amount. The Rule clarifies that a borrower may submit to a lender documentation of eligible payroll and nonpayroll costs that exceed the amount of the borrower’s PPP loan using SBA Forms 3508, 3508EZ, 3508S, or the lender’s equivalent form. With such submission, the amount of PPP loan forgiveness a borrower may receive cannot exceed the principal amount of the PPP loan. The lender will then confirm receipt of this documentation and use it to verify payroll and nonpayroll costs. Finally, the lender will confirm the borrower’s calculation as documented on the loan forgiveness application up to the amount required to reach the requested forgiveness amount, and no more.

  1. Alternative Loan Forgiveness Application

The SBA has issued an alternative loan forgiveness application, SBA Form 3508S, which is available to PPP borrowers of $50,000 or less. If a borrower uses this alternative application, the organization is exempt from any reductions in the borrower’s loan forgiveness amount based on reductions either in full-time equivalent employees or employee salary and wages.

Many lenders have opened their portals for borrowers to submit PPP loan forgiveness applications. Borrowers should be mindful of two vital pieces of information—the Rule and the previously noted alternative forgiveness application—as they complete their applications for forgiveness. PYA stands ready to assist borrowers with the PPP process, and can also help businesses with their year-end planning or any other tax or accounting needs. Contact a PYA executive below at (800) 270-9629.

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