Since its inception by the Coronavirus Aid, Relief, and Economic Security Act in March, the Paycheck Protection Program has provided billions in loans to small businesses affected by the COVID-19 pandemic. Funding has helped them stay open, pay their expenses (including rent and mortgage interest), and keep employees on payroll. However, the program, managed by the Small Business Administration and Treasury through individual lenders, has faced challenges. The requirements, schedule, and award process have changed, and several enhancements and re-authorizations have been made to keep helping businesses in need.
The good news for PPP borrowers is that the finance department has officially started processing grant applications. All PPP borrowers should submit the application directly to their lender, not to the SBA or the Treasury Department. The lender will check and present it to these agencies. The review and approval process can take anywhere from a few business days to 150 days, the maximum amount allowed by law. PPP loans of USD 2 million or more are automatically checked according to Treasury Policy, but smaller loans can also be checked at random.
Borrowers have several options in deciding which of the three forms to use to seek forgiveness:
Form 3508 was the original request and includes a forgiveness calculation form; Certificate that the amount for which the borrowers seek forgiveness has been used for appropriate purposes and that they have provided supporting documents to their lender; and the requirement to provide detailed information on the number of employees and their salaries or wages. The full application is five pages long and can be used by any borrower. However, if borrowers qualify to use either of the other two forgiveness applications, they may not want to use that one.
Form 3508EZor the development cooperation application was published in the spring after an outcry that the original form was too complicated, especially for borrowers who are sole proprietorships or independent contractors and who don't have an accountant or lawyer to help them. The EZ application is available to borrowers who are self-employed and without employees, who have not reduced their employees 'pay by more than 25%, and who have not reduced their employees' working hours, or who confirm that they have lost their business due to COVID-19 did and did not reduce employee pay by more than 25%. Borrowers who meet any of these requirements can use this streamlined three-page application that requires less calculations and less documentation. This form allows independent contractors without employees who opt for the 24 week coverage period to claim their full loan amount in exchange for a forgivable owner compensation.
Form 3508SThe latest addition was released by the SBA and the Treasury Department in early October. This form is only one and a half pages long and is available to borrowers with a total PPP loan amount of $ 50,000 or less. Similar to Form 3508EZ, fewer calculations and paperwork are required than the full forgiveness form, although lenders will still need to be provided with supporting documents showing how the loan was used. The biggest benefit for borrowers who qualify to use this form is that they are exempt from the program rule that forgivable loan amounts are reduced due to reductions in full-time equivalents or in salaries or wages. This provides flexibility for borrowers, reflecting an understanding that very small businesses may have taken out PPP loans to meet 100% forgiveness requirements. However, as the pandemic spread and their business continued to suffer, they were not able in every instance.
Regardless of the form borrowers use, they should speak to their lender throughout the process and ask questions about documentation and other requirements as soon as possible. Borrowers can ask for forgiveness anytime up until the loan due date, and some tax experts suggest waiting to see if Congress passes new incentive measures. However, borrowers who do not apply within 10 months of the last day of their insurance period will be required to make loan payments to their PPP lender.
