04 Nov Update on PPP Loan Forgiveness for Loans Less Than $50,000
We at Reconciled Solutions want to give you an update on the PPP Loan Forgiveness Process. The latest news is that the SBA released the 3508S form on Thursday, October 8, 2020, which is intended for borrowers with loans under $50k. This form offers a blanket SAFE HARBOR from reductions in forgiveness; however, it is NOT blanket forgiveness!
The borrower will need to sign-off on seven certifications (such as that their payroll spending met at least 60% of PPP loan proceeds) and provide verification of payroll costs and non-payroll costs to their lender. Be sure to check with your particular lender for the documents they will need to satisfy the verification process.
One area of simplification for these smaller borrowers is that Borrowers with loans under $50K won’t have to perform FTE or salary reduction calculations. Borrowers do not have to worry about if you have reduced FTE / Salary wage reduction during covered period. You will still have to provide documentation for eligible Payroll costs and Non-Payroll costs. The Borrower must retain all such documentation in its files for six years after the date the loan is forgiven or repaid in full, and permit authorized representatives of SBA, including representatives of its Office of Inspector General, to access such files upon request.
What Does This Mean To You?
If your PPP loan was $50,000 or less, you now have the “green light” to apply for forgiveness. There is no need to rush into the forgiveness application process. As long as a borrower submits the loan forgiveness application within ten months of the completion of the Covered Period (8 /24 weeks), the borrower is not required to make any payments until the forgiveness amount is remitted to the lender by the SBA. If the loan is fully forgiven, the borrower is not responsible for any payments. If only a portion of the loan is forgiven, or if the forgiveness application is denied, any remaining balance due on the loan must be repaid by the borrower on or before the maturity date of the loan. Interest accrues during the time between the disbursement of the loan and SBA remittance of the forgiveness amount. The borrower is responsible for paying the accrued interest on any amount of the loan that is not forgiven. The lender is responsible for notifying the borrower of remittance by SBA of the loan forgiveness amount (or that SBA determined that no amount of the loan is eligible for forgiveness) and the date on which the borrower’s first payment is due, if applicable.
Please know that if you are confused or concerned about this PPP loan forgiveness process, Reconciled Solutions offers services to help you through it. We want to make sure you get as much of the loan forgiven as possible. If you want more information about our assistance with PPP forgiveness application, email Tatyana Shamarina at tatyanas@reconciledsolutions.net.
Now would be a great time to reach out to your lender to see if, and when, they will be ready to process the new Form 3508S. You’ll want to start gathering the documents your lender will need to verify your payroll and eligible non-payroll costs (rent, utilities and mortgage interest) to determine the amount of your PPP loan forgiveness.
Once your forgiveness application is submitted, don’t anticipate hearing back quickly. We have been advised that the lender has 60 days from receipt of a complete loan forgiveness application to issue a decision to the SBA, and the SBA, subject to its review, will remit funds within 90 days after the lender issues its decision to the SBA. The lender will notify the borrower of the loan forgiveness amount.
For those with PPP loans of more than $50,000, our recommendation is to sit tight for further guidance and broader forgiveness opportunities. You have up to 10 months after the 8 or 24-weeks Covered Period ended to apply for forgiveness, so time really is on your side. We know that you may be anxious to get the funds fully forgiven, in writing, but we feel strongly that as long as your documentation is well-substantiated, you can count on this money as forgiven. The benefit of waiting a bit would allow more time for lenders and the SBA to work out any bumps or bruises that happen when being the first applicant in a long line of applicants for a brand new process for all parties. We don’t want you to experience bumps or bruises that would result in not earning 100% forgiveness.
While we remain hopeful for a blanket forgiveness from Congress for loans up to $150,000, the SBA has already taken the first step for smaller loans.
