Article written by:
Rebekah Smith, CPA, CFF, CVA, MAFF
Director of Forensic & Dispute Advisory Services
Dustin Minton, CPA, MBA
Director, Restaurant Services
Director, Accounting & Business Advisory Services
Late last week the Small Business Administration (‘SBA’) issued the Paycheck Protection Program (‘PPP’) Loan Forgiveness Application Form 3508S and instructions for borrowers whose loan is $50,000 or less. The “S” presumably stands for “simple” and upon review, it does seem to achieve this objective compared to Form 3508EZ.
Form 3508S consists of two pages:
- The first page consists of basic information as to the borrower, loan number, loan amount and the forgiveness amount.
- The forgiveness amount is one line where the borrower is to enter the total amount of payroll and nonpayroll costs eligible for forgiveness. There appear to be no deductions for FTEE reductions or wage rate reductions nor any safe harbors to qualify for. In essence, so long as you spent the loan on qualified payroll and nonpayroll expenses, full forgiveness appears to be a given without consideration to any headcount or wage reductions.
- The remainder of the page is then certifications as to how the money was spent, that payroll costs equal at least 60% of the total requested forgiveness amount, that compensation was appropriately capped based on the period selected, along with various other certifications, similar to those on the “full” 3508.
- The second page of the application requests optional PPP demographic information including veteran status, gender, race and ethnicity.
Documentation requirements are still such that the borrower must submit documents with the application supporting how the funds were spent, including:
- Payroll: Documentation verifying the eligible cash compensation and non-cash benefit payments including:
- Bank account statements or third-party payroll service provider reports
- Tax forms: payroll tax filings, 941s, state quarterly business and individual employee wage reporting
- Payment receipts or canceled checks documenting the amount of employer health insurance and retirement plans
- Nonpayroll: Documentation verifying existence of the obligation before February 15, 2020, and eligible payments during the covered period:
- Business mortgage interest payments: a copy of lender amortization schedule and receipts or canceled checks or lender account statements
- Business rent or lease payments: copy of the current lease agreement and receipts or canceled checks verifying eligible payments or lessor account statements from February 2020 and from the covered period
- Business utility payments: a copy of invoices from February 2020 and those paid during the covered period and receipts, canceled checks or account statements verifying those payments
Borrowers are also required to keep, but not submit, 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 should maintain those records for a period of six years after the date the loan is forgiven.
With the simpler form and the absence of the FTE calculations, the 3508S earns its “S”; however, this falls short of the “automatic” forgiveness that is still included in pending legislation. The borrower will still need to submit supporting documentation with the application as well as keep other documentation in their files.
To that end, it may still behoove borrowers at $50,000 or below to wait to see the outcome of the pending legislation; several banks are still not accepting any applications for loans under $150,000 regardless. However, if your loan is $50,000 and less and your bank is accepting applications, the 5308S is certainly some good news.
If you have a PPP loan and are contemplating a transaction, following this Notice will be critical to maintaining the ability to achieve forgiveness. As always, your GBQ SBA PPP team is here to assist you with any aspect of the program or questions you may have. Contact Rebekah Smith, Dustin Minton, or Jeremy Bronson today.