SBA Release PPP Forgiveness Application and Guidance

The U.S. Small Business Administration issued much-awaited guidance, allowing borrowers to claim forgiveness of their Paycheck Protection Program (“PPP”) loans.  The SBA released on Friday a PPP Loan Forgiveness Application which provides guidance on how to claim the single most enticing aspect of the CARES Act’s borrowing initiative for small businesses and self-employed individuals—loan forgiveness.  The SBA’s Loan Forgiveness Application provides detailed instructions for borrowers and the calculation of PPP loan forgiveness.  The borrower is expected to complete the application and submit it to their lender, who will ultimately be responsible for assessing forgiveness. The process can be completed electronically.  

Under the new procedures, a borrower must request the forgiveness of PPP loan proceeds by filing SBA Form 3508, Paycheck Protection Program Loan Forgiveness Application.  The application has four components: (1) the PPP Loan Forgiveness Calculation Form; (2) PPP Schedule A; (3) the PPP Schedule A Worksheet; and (4) an (optional) PPP Borrower Demographic Information Form.  Borrowers are required to submit items (1) and (2) to their lender.

For borrowers with PPP loans over $2 million, the SBA Form 3508 requires that a borrower who, along with its affiliates, received aggregate PPP funds over $2 million, check a box alerting the SBA to the size of the aggregate loan.  This provision flags PPP loans that the Treasury Department has already warned it will audit. Notably, however, the form’s instructions specifically limit the obligation to check this flag-raising box to loans aggregated with affiliates “to the extent required under SBA’s interim final rule on affiliates issued April 15, 2020.”  That means that borrowers will still have to interpret the meaning of those affiliation rules to determine whether to check the box.  Borrowers should seek legal guidance with respect to the affiliation rules where they are potentially applicable.

However, the form does include several measures to reduce compliance burdens and simplify the process for borrowers, including:

  • Options for borrowers to calculate payroll costs using an “alternative payroll covered period” that aligns with borrowers’ regular payroll cycles
  • Flexibility to include eligible payroll and non-payroll expenses paid or incurred during the eight-week period after receiving their PPP loan
  • Step-by-step instructions on how to perform the calculations required by the CARES Act to confirm eligibility for loan forgiveness
  • Borrower-friendly implementation of statutory exemptions from loan forgiveness reduction based on rehiring by June 30
  • Addition of a new exemption from the loan forgiveness reduction for borrowers who have made a good-faith, written offer to rehire workers that was declined

Read SBA news release and download PPP forgiveness form>>>

LSBDC Webinar on PPP Forgiveness Guidelines>>>