Over 4.5 million small business owners, 85% of round 1 PPP loans, are currently eligible for PPP loan forgiveness.
The 1-page PPP loan forgiveness application lifts the burden of cumbersome paperwork from borrowers with first or second draw loan amounts of $150,000 or less. Form 3508S was released on January 19, 2021. Updated versions of forms 3508 and 3508EZ with the January 19, 2021 revision date include additional eligible costs as defined in the Economic Aid to Hard-Hit Small Businesses, Nonprofits, and Venues Act (Economic Aid Act).
Form 3508S may be used to submit to your lender even if you have already requested forgiveness. You may use this one-page form until the SBA notifies your lender of a final loan review decision or a PPP loan forgiveness payment is made to your lender.
What questions are on Form 3508S?
When the SBA announced a “one-page application,” there was some skepticism that it would truly be a one-page forgiveness application. The application portion is indeed one page but is followed by 5 pages that request demographic information and instructions to complete the application.
The pertinent information the application asks for is:
- Business Name, Address, NAICS Code, EIN, and contact information
- Loan Numbers
- Date of Disbursement
- Employees at the time of loan application and forgiveness application
- Covered Period
- Amount of the loan amount spent on payroll costs
- Requested loan forgiveness amount
- Certification that the borrower used the funds in accordance with the guidelines to receive forgiveness
- Certification that the information provided is true
- Signature, name, and title of the borrower
What if your loan is greater than $50,000 or your loans total more than $2 million across affiliates?
If a business owner received a loan that exceeds $50,000 or received $50,000 or less, but its total affiliates amassed loans in excess of $2 million or more, a borrower may be required to adjust the requested loan forgiveness amount because of a reduction in full-time equivalent employee counts and salary or wage reductions exceeding 25%. However, reductions may be waived if the borrower meets a safe harbor.
If Form 3508S loan forgiveness application is used for a second draw PPP loan, the borrower must do two things. The borrower must submit documentation for the reduction in revenue, and the borrower must have used all money from their first draw PPP loan on eligible expenses prior to the disbursement of the second draw PPP loan.
What documentation is needed to be eligible for loan forgiveness using Form 3508S?
When applying for forgiveness, no additional records are needed to submit with the form. However, your lender may request supporting information be submitted when you file the application for forgiveness. It is important for borrowers to retain documents in case SBA auditors request supporting documents. Upon the date the loan forgiveness application is submitted to the lender, it is a best practice that you retain all employment records and payroll documentation for four years and all other documentation for three years.
The SBA reserves the right to request additional information to evaluate eligibility for a PPP loan and for loan forgiveness. Failing to provide the requested information to the SBA may make the applicant ineligible for the PPP loan or deny loan forgiveness.
Eligibility for loan forgiveness is evaluated in accordance with PPP guidelines. The lender may deny a borrower’s loan forgiveness application if the SBA determines a borrower was ineligible for the PPP loan.
We will continue to provide additional updates regarding PPP loans and forgiveness. There is a lot of available information available to assist taxpayers experiencing COVID-19 related financial difficulties to be aware of these options and get assistance. Contact us today to review your options.
Amanda is a general ledger manager and business advisor at Wilke & Associates. She currently serves closely-held businesses using her prior experience as a corporate accounting manager in the manufacturing industry. Her resume includes serving clients in various business sectors to include distribution, logistics, real estate, and pension plans.