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More Guidance Released From Government Regarding Second-Draw PPP Funding and Forgiveness Process.

As of January 20, 2021, the SBA and Treasury released an updated and simplified version of the PPP Forgiveness application. The form is called PPP Loan Forgiveness Application Form 3508S. It can be used by borrowers that received a PPP loan of $150,000 or less. Borrowers are not required to submit any supporting documentation with the application but are mandated to maintain payroll, nonpayroll, and other documents that could be requested during an SBA loan review or audit. The groups also released a Form 3508 for entities that received PPP funds in excess of $150,000.

The second-round of PPP funding also opens the possibility of PPP funding for entities that were not eligible for the first-round such as certain 501(c)(6) not-for-profits. These entities include chambers of commerce, destination marketing organizations, certain housing cooperatives, and some local media stations. If a borrower falls into this category, they should take notice of specific lender restrictions regarding funding as lender requirements for these entities tend to vary by lender.

The rules seem to be constantly changing with regards to PPP loans, as evidenced by the weekly release of procedure notices, interim final rules, and other forms of guidance from either the IRS, SBA, or the Treasury. For example, recently released guidance explains how both first-draw and second-draw loan calculations should be evaluated by lenders. The new guidelines also discussed what happens in the event that a borrower receives a larger PPP loan than originally eligible for. If an application error caused a PPP borrower to receive a larger PPP loan than it was eligible for, the SBA and Treasury have determined that the borrower may not receive loan forgiveness for any amount exceeding the allowed maximum, regardless of whether the borrower or the lender is responsible for the error. The borrower will be required to begin making payments on the remaining loan amount that is in excess of the amount forgiven. The new guidance also discusses what happens if a borrower wants to resubmit their loan forgiveness application using the updated Form 3508S but originally applied using a different form. The borrower may resubmit the loan forgiveness application to its lender at any time until the SBA notifies the lender of a final SBA loan review or remits the lender the PPP loan forgiveness payment. If a lender receives a timely borrower resubmission of a loan forgiveness application using SBA Form 3508S, the lender should promptly request the withdrawal of any lender loan forgiveness decision by notifying the SBA through the SBA Paycheck Protection Platform. Resubmissions are not allowed after the SBA notifies the lender of a final SBA loan review decision or remits the PPP loan forgiveness payment to the lender.

Businesses should ensure that they are doing everything possible to receive full forgiveness of the PPP loans. If you own a small business and have any questions regarding applying for the second round of PPP loans, forgiveness on the loan, or any questions regarding the treatment of PPP loans during a sale or transfer of your company


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