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On October 8, 2020, the U.S. Small Business Administration (SBA) issued an interim final rule that revises previous guidance to provide relief on the forgiveness process for small borrowers with Paycheck Protection Program (PPP) loans of $50,000 or less and, for PPP loans of all sizes, lender responsibilities for the review of borrower documentation of eligible costs for forgiveness in excess of a borrower’s PPP loan amount. These changes are effective immediately.

Loan Forgiveness Changes

The SBA created a new two-page application form, Form 3508S, and related instructions that qualifying borrowers can use. A borrower of a PPP loan of $50,000 or less, other than any borrower that together with affiliates received PPP loans totaling $2 million or more, may use 3508S. Review the affiliation rules carefully. A borrower using this form is exempt from both:

  • Any reduction in its loan forgiveness amount on account of full-time equivalent reductions
  • Any reduction in its loan forgiveness amount on account of reductions in employee salaries or wages

The rule allows an eligible borrower to be exempt from the two reduction items above and no calculation of those items is necessary. The rule does not exempt a borrower that is using Form 3508S from submitting the required documentation to substantiate payroll and nonpayroll costs. These requirements (including the requirement that at least 60 percent of the potential forgiveness amount was used for eligible payroll costs) are largely unchanged from the existing ones.

The SBA leveraged its authority provided in the Coronavirus Aid, Relief, and Economic Security Act (CARES Act) by using its de minimis discretion to enact these changes and no further legislative action is required. There are approximately 3.6 million outstanding PPP loans of $50,000 or less, which represents approximately $62 billion of the $525 billion in PPP loans and 70 percent of the 5.2 million loans issued.

Additional legislation, if a compromise can be reached in Washington, would be needed to further increase the cutoff level for simplified loan forgiveness relief.

The SBA opened its lender forgiveness portal on August 10, 2020, though many lenders have waited to begin accepting customer applications. As of late September, lenders have submitted about 96,000 forgiveness applications, and the SBA began its approval process and remitting forgiveness payments on October 2, 2020.

Many borrowers have wisely waited in filing for loan forgiveness, hoping for additional relief. Borrowers that are qualified to use Form 3508S should consider starting the process for loan forgiveness. Borrowers under the $50,000 threshold are unlikely to see additional program changes. Given the large volume of outstanding PPP loans, both lenders and the SBA may become overwhelmed.

Lender’s Review Responsibilities

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

  • Confirm receipt of the borrower certifications contained in Form 3508S or lender’s equivalent form
  • Confirm receipt of the documentation the borrower must submit to aid in verifying payroll and nonpayroll costs, as specified in the instructions to Form 3508S or lender’s equivalent form

Providing an accurate calculation of the loan forgiveness amount is the borrower’s responsibility, and the borrower attests to the accuracy of its reported information and calculations on the loan forgiveness application. A borrower cannot receive forgiveness without submitting all required documentation to the lender. A lender may rely on borrower representations and 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.

Borrower Submission of Excess Costs

A borrower may submit documentation of eligible payroll and nonpayroll costs that exceed the amount of the borrower’s PPP loan. In these cases, a lender should confirm receipt of the borrower’s required documentation to aid in verifying payroll and nonpayroll costs, and, if applicable (for Form 3508 or 3508EZ), confirm the borrower’s calculations, up to the amount required to reach the requested forgiveness amount.


BKD will continue to follow this developing situation. As with most topics related to COVID-19, changes are being made rapidly. Please note that this information is current as of the date of publication. Visit BKD’s COVID-19 Resource Center to learn more. If you have questions about these changes, contact your BKD Trusted Advisor™ today.


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