PPP - Interim Final Rule: Additional Revisions to Loan Forgiveness and Loan Review Procedures Interim Final Rules

Schneider Downs continues to track the evolving landscape of federal financial programs offered in the wake of the business disruption caused by the coronavirus crisis.  On October 8, 2020, the U.S. Small Business Administration (SBA) released a new Interim Final Rule (IFR) related to the Paycheck Protection Program (PPP) that addresses revisions to prior IFRs on Loan Forgiveness and Loan Review Procedures.

The SBA’s latest IFR provides guidance for : (1) loan forgiveness for loans less than $50,000; and (2) lender review responsibilities for loans of all sizes when eligible costs for forgiveness are in excess of the loan amount.

1. Form 3508S

Form 3508S is now available for borrowers with loans less than $50,000 (unless the borrower, with affiliates, received more than $2 million).  Borrowers eligible to use this form are exempt from any reductions to loan forgiveness for reductions in full-time employee (FTE) counts and reductions to salary and wages.

The SBA stated that this de minimis exemption was appropriate because there were 3.57 million loans of $50,000 or less totaling $62 billion.  Approximately 1.71 million of these loans were to businesses with zero or one employee, so the exemption for reductions would not be relevant to them.  Therefore, this exemption is only applicable to approximately $49 billion, or 9%, of the total available PPP loan amounts and most of these borrowers would likely have not reduced FTEs or salary/wages or would qualify for one of the existing exemptions from loan forgiveness amount reductions.

2. Changes to the Loan Review Rules

There are two separate items addressed in the IFR for lenders as follows:

Procedures for 3508S

For lenders, when a borrower submits Form 3508S, or the lender equivalent, the lender is required to do the following:

• Confirm receipt of the borrower certifications;
• Confirm receipt of documentation required to verify payroll and nonpayroll costs as specified in Form 3508S, or the lender equivalent.

Providing an accurate calculation of loan forgiveness is the borrower’s responsibility and lenders may rely on borrower representations.

Procedures Related to Submission of Excess Costs

The IFR addresses what lenders should do if a borrower submits documentation of eligible payroll and nonpayroll costs in excess of the borrower’s loan amount.

Since the amount of loan forgiveness cannot exceed the principal amount of the loan, lenders should confirm receipt of the appropriate documentation (according to the specific Form 3508 submitted) and, if applicable, confirm the borrower’s calculations on the application up to the amount required to reach the requested forgiveness amount.

If you need more information or assistance regarding your PPP loan, visit our dedicated PPP Loan resource, reach out to any of your contacts at Schneider Downs or contact Joel Rosenthal.