As of October 8, 2020, loan recipients under the Paycheck Protection Program (“PPP”) have a new, streamlined application form for requesting loan forgiveness. The new loan forgiveness form, SBA Form 3508S, may be used by businesses that received a loan totaling less than $50,000 or, together with its affiliates, received PPP loans totaling less than $2 million in the aggregate.
SBA Form 3508S provides a streamlined way for an employer to gather basic information about employee retention and payroll expenditures. The SBA has also released Form 3508S instructions to provide clear guidance for how employers should calculate their forgiveness amount. The two-page form requires the employer to provide their SBA PPP loan number, loan amount and date, employee retention numbers, contact information, and loan forgiveness amount. The employer must also certify that they have followed all terms of the loan.
Loan forgiveness can be granted for the “Covered Period,” either the 24-week period beginning on the loan disbursement date, or for loans before June 5, 2020, a possible elective 8-week period. Loan forgiveness is primarily given for costs related to retaining employees, however, certain other costs may be covered.
To ensure loan recipients get the maximum eligible return under the loan forgiveness program, employers should consider their eligible nonpayroll costs in calculating their forgiveness amount. These include mortgage interest payments on a mortgage obligation incurred before February 15, 2020; business rent or lease payments for leases entered into before February 15, 2020; and, covered utility payments. Eligible nonpayroll costs can not exceed 40% of the forgiveness amount.
The forgiveness form should be submitted to the loan recipient’s lender along with any records demonstrating the cash compensation and non-cash benefits paid to employees during the Covered Period, and documentation demonstrating the validity of nonpayroll costs. Employers are also required to maintain documentation in their records for six years.
If you would like more assistance on how you can maximize your PPP return, please contact the attorneys at Rock Fusco & Connelly, LLC.