The SBA Released the PPP Loan Forgiveness Application (SBA Form 3508) on Friday, May 15th.

Our key takeaways:  

  1. Form will be filed with the lender 
  2. Form 3508 allows a borrower to select as the covered period either the 8-week (56-day) period from the first disbursement date of the PPP loan (identified as the “covered period”) or, if more convenient, to align with a borrower’s payroll schedule, an alternative 8-week period that begins on the first day of the borrower’s first pay period following the loan disbursement (identified as the “alternative covered period”). Whichever period the borrower selects must be used consistently through the application but note that while the borrower may choose to use the alternative covered period for payroll, it may not do so for non-payroll costs.
  3. The form is retaining the non-statutory 75% payroll test.
  4. The instructions do not fully define the words “paid and incurred”.
  5. Form 3508 appears to include an additional FTE reduction safe harbor (PPP Schedule A) such that if a borrower has not reduced either (i) the number of its employees; and (ii) the average paid hours of its employees, between 1/1/20 and the end of the covered period or alternative covered period, then there is no reduction in the forgiveness amount.

The form is complex and will require learning time for the lenders, borrowers, attorneys and CPA’s.  

While last week’s update removed the “necessary” challenge for many borrowers, the fraud warnings continue to apply in the certification that borrowers must sign (see page 4 of form 3508).

This alerts us that the SBA will continue to look at how the funds were used and the truthfulness of the original application and the forgiveness application.  

While the forgiveness application and instructions provide some clarity it also triggers a pile of new questions and additional complexity for business owners. We anticipate further guidance from the Treasury and SBA on hashing out the forgiveness.

We will post questions on our social media feeds and in our upcoming briefs should the matter require broader attention.

Jill Kuksa & Deb Hanselmann