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New PPP Forgiveness Guidance Issued

On October 8, 2020, the SBA issued a new interim final rule providing additional guidance for PPP forgiveness and lender processing of forgiveness requests.  The new interim final rule is summarized below and attached to this client alert.

Loans Under $50,000     

As many predicted, the SBA has instituted a de minimis forgiveness amount.  The SBA has determined that loans under $50,000 are de minimis, unless the borrower together with its affiliates cumulatively received loans of more than $2,000,0000.  For such de minimis borrowers of $50,000 or less, the SBA has streamlined the forgiveness process.  De minimis borrowers may use a new streamlined forgiveness application to apply for forgiveness (Form 3508S is attached below with instructions—which still requires a borrower to submit payroll and nonpayroll documentation verifying payment of eligible costs).  Further, de minimis borrowers that qualify for and use Form 3508S are exempt from reductions to their forgiveness amounts based on reductions to FTEs or reductions in employee salary or wages. 

Lender Responsibilities

Revisions in the new interim final rule confirm that it is the borrower’s responsibility to accurately calculate the loan forgiveness amount based on payments of eligible costs.  Lenders do not need to independently verify the borrower’s information if the borrower submits documentation supporting the loan forgiveness amount and attests to the accuracy of the loan forgiveness amount.

Many borrowers have accumulated eligible costs well in excess of their loan amount.  Even though a borrower can only receive forgiveness up to the loan amount, some borrowers have been providing lenders documentation of eligible costs well in excess of the forgiveness amount, presumably to assure full forgiveness if some costs are deemed unforgivable.  The new interim rule addresses this situation.  It provides that, regardless of the forgiveness form used by the borrower, that a lender should acknowledge receipt of the documents that a borrower is required to submit to verify payroll and nonpayroll costs and confirm the borrower’s calculations up to the forgiveness amount. 

Additional forgiveness processing guidelines are a necessity, however, the new interim final rule provides much needed guidance.  As new guidance is issued we will keep you apprised of it.  In the meantime, if you have any questions, please contact a MacDonald Illig attorney or call our office at 814-870-7600.