SBA Simplifies Forgiveness Process for Some PPP Loans

On October 19, 2020, the U.S. Small Business Administration (SBA) and the Treasury Department issued interim final rules (IFR) revising the process for some businesses to seek Paycheck Protection Program (PPP) loan forgiveness and lender evaluation of loan forgiveness applications submitted in accordance with the new process. These IFR offer additional guidance to further simplify the forgiveness and loan review processes for PPP loans of $50,000 or less.

In connection with the issuance of these IFR, the SBA also issued an alternative loan forgiveness application, SBA Form 3508S, which can be used by borrowers applying for loan forgiveness on PPP loans totaling $50,000 or less. (Borrowers with affiliates that also have PPP loans are not eligible under these IFR if the total amount of the loans, including those of affiliates, was $2 million or greater.) Borrowers with loans of $50,000 or less may use the SBA Form 3508S or a lender-created equivalent of the new form.

In response to these IFR, PIA National submitted comments expressing a mixture of support for and trepidation about the provisions contained therein.

PIA National supports the de minimis exemptions, which relieve borrowers who use SBA Form 3508S or a lender-equivalent form of reductions in loan forgiveness that would have been based on reductions in full-time equivalent (FTE) employees or reductions in employee salary or wages that would otherwise have applied. These exemptions support the goals of the CARES Act by providing financial help to a broad range of small businesses and by providing borrowers with needed flexibility. We hope the implementation of these IFR will also speed up the loan forgiveness process for borrowers who use the new form. In our current economic climate, and with a patchwork of new restrictions being imposed around the country, small businesses need policies and procedures that make their long-term survival easier to achieve. These IFR serve that purpose.

However, the pool of borrowers to whom these IFR apply is too small; it should be expanded to include borrowers with up to $150,000 in PPP loans. For the past several months, we have been advocating for additional assistance for small businesses. Among other actions, we have encouraged Congress, as part of any new pandemic relief legislative package, to simplify the PPP loan forgiveness process for businesses that borrowed up to $150,000, three times the amount addressed by these IFR. While PPP loans of $150,000 or less account for 86 percent of total PPP recipients, they account for fewer than 27 percent of PPP loan dollars. This simplified forgiveness process could be substantially expanded without sacrificing a commensurate percentage of PPP loan dollars. This more streamlined process should be made available to a larger number of small businesses.

As always, we remain committed to continuing to work with Congress, the Treasury Department, and the SBA going forward to improve the PPP loan forgiveness process so that it provides the type and level of support needed for the nation’s small businesses to survive and thrive in this challenging environment.