The U.S. Small Business Administration and the Treasury Department have issued an interim final rule on October 8, concerning the forgiveness and loan review process for the Paycheck Protection Program (PPP). This interim rule makes it easier for companies to get their PPP loans of $50,000 or less forgiven with a simpler loan forgiveness application. This rule also simplifies lender responsibilities with respect to the review of borrower documentation of eligible costs for forgiveness in excess of a borrower’s PPP loan amount, for PPP loans of all sizes.

Reductions to Loan Forgiveness Amount   

A borrower of a PPP loan of $50,000 or less, other than any borrower that together with its affiliates received loans totaling $2 million or greater, may use SBA Form 3508S (or lender’s equivalent form) to apply for loan forgiveness. A borrower that uses this form is exempt from any reductions in the borrower’s loan forgiveness amount based on

• Reductions in full-time equivalent (FTE) employees
  OR
• Reductions in employee salary or wages that would otherwise apply.

Documents that Must be Submitted by Each Borrower with Form 3508S

Non-payroll: Documentation verifying existence of the obligations/services prior to February 15, 2020 and eligible payments from the Covered Period.

1. Business mortgage interest payments: Copy of lender amortization schedule and receipts or cancelled checks verifying eligible payments from the Covered Period; or lender account statements from February 2020 and the months of the Covered Period through one month after the end of the Covered Period verifying interest amounts and eligible payments.
2. Business rent or lease payments: Copy of current lease agreement and receipts or cancelled checks verifying eligible payments from the Covered Period; or lessor account statements from February 2020 and from the Covered Period through one month after the end of the Covered Period verifying eligible payments.
3. Business utility payments: Copy of invoices from February 2020 and those paid during the Covered Period and receipts, cancelled checks, or account statements verifying those eligible payments

Payroll: Documentation verifying the eligible cash compensation and non-cash benefit payments from the Covered Period or the Alternative Payroll Covered Period consisting of each of the following:

1. Bank account statements or third-party payroll service provider reports documenting the amount of cash compensation paid to employees.
2. Tax forms (or equivalent third-party payroll service provider reports) for the periods that overlap with the Covered Period or the Alternative Payroll Covered Period:
   • Payroll tax filings reported, or that will be reported, to the IRS (typically, Form 941); and
   • State quarterly business and individual employee wage reporting and unemployment insurance tax filings reported, or that will be reported, to the relevant state.
3.  Payment receipts, cancelled checks, or account statements documenting the amount of any employer contributions to employee health insurance and retirement plans that the Borrower included in the forgiveness amount.

Documentation

The Borrower must retain all such documentation in its files for six years after the date the loan is forgiven or repaid in full: all records relating to the Borrower’s PPP loan, including documentation submitted with its PPP loan application, documentation supporting the Borrower’s certifications as to its eligibility for a PPP loan, documentation necessary to support the Borrower’s loan forgiveness application, and documentation demonstrating the Borrower’s material compliance with PPP requirements. The borrower must also permit authorized representatives of SBA, including representatives of its Office of Inspector General, to access such files upon request.

Borrower Submission of Excess Costs

In some cases, a borrower may submit to a lender documentation of eligible payroll and non-payroll costs that exceed the amount of the borrower’s PPP loan. Should this occur, a lender should confirm receipt of the documentation the borrower is required to submit to aid in verifying payroll and non-payroll costs, and, if applicable (for SBA Form 3508, 3508EZ, or lender’s equivalent form), confirm the borrower’s calculations on the borrower’s Loan Forgiveness Application, up to the amount required to reach the requested Forgiveness Amount.

Lender Review Process

When a borrower submits SBA Form 3508S or lender’s equivalent form, the lender shall:

1. Confirm receipt of the borrower certifications contained in the SBA Form 3508S or lender’s equivalent form.
2. Confirm receipt of the documentation the borrower must submit to aid in verifying payroll and non-payroll costs.

Providing an accurate calculation of the loan forgiveness amount is the responsibility of the borrower, and the borrower attests to the accuracy of its reported information and calculations on the Loan Forgiveness Application. The borrower shall not receive forgiveness without submitting all required documentation to the lender. The lender does not need to independently verify the borrower’s reported information if the borrower submits documentation supporting its request for loan forgiveness and attests that it accurately verified the payments for eligible costs.