On January 19, 2021, revised PPP Loan Forgiveness Applications were released. The forms address significant changes in the recent law and simplify the loan forgiveness process for borrowers with loans of $150,000 or less.
Expansion of Borrowers Qualifying to Use the Form 3508S
The borrowers eligible to request loan forgiveness of their PPP loan using the simplified Form 3508S has been expanded from loans of $50,000 or less to loans of $150,0000 or less. This modification will allow a much larger number of small businesses access to the simplified form.
The revised Form 3508S can be used to request forgiveness for both first draw and second draw loans of $150,000 or less.
Documentation of Eligible Forgiveness Expenses Need Not be Submitted with the Form 3508S
The original version of Form 3508S was not very useful for small borrowers because it still required significant documentation to be included with the forgiveness application in order to receive forgiveness. The new form does not require any additional support be included to receive forgiveness.
However, the borrower must meet all of the requirements for forgiveness including:
- Use of the funds to pay business costs that are eligible for forgiveness;
- Eligible expenses must include payroll costs equal to at least 60% of the requested loan forgiveness amount;
- Limitations on owner compensation and benefits still apply; and
- Loans in excess of $50,000 (or smaller loans that together with affiliates received over $2M of PPP loans) must apply the required pay and employee reductions, if applicable.
Borrowers must still maintain the documentation supporting the loan and the loan forgiveness application could be subject to review even after forgiveness is provided.
Forms 3508EZ and 3508 Revised
The major revisions to these forms include:
- The ability to check whether the forgiveness request is for a first draw or second draw loan;
- Additional lines for the eligible
expenses added by the new legislation:
- Covered Operations Expenditures;
- Covered Property Damage Costs;
- Covered Supplier Costs;
- Covered Worker Protection Expenditures; and
- An additional certification for second draw forgiveness applications stating that "the Borrower used all of the First Draw PPP Loan amounts on eligible expenses prior to disbursement of the Second Draw PPP Loan."
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.