October 09, 2020

SBA announces simpler forgiveness for loans under $50K, updates FAQs

small biz

The Small Business Administration (SBA) and Treasury Department Thursday released a simpler loan forgiveness application for paycheck protection program (PPP) loans under $50,000. The SBA also published a notice to platform authorizing officials that the agency has begun remitting loan forgiveness payments to lenders.

In addition, the agencies released updated FAQs providing additional guidance on loan deferrals.

The interim final rule released Thursday aims to simplify further:

  • the forgiveness and loan review processes for PPP loans of $50,000 or less; and
  • lender responsibilities with respect to the review of borrower documentation of eligible costs for forgiveness in excess of a borrower's PPP loan amount for PPP loans of all sizes.

The simpler loan application – SBA Form 3508S – may be used by any borrower with a total loan amount of less than $50,000, except for those borrowers that together with their affiliates received loans totaling $2 million or greater. A borrower that uses this form is exempt from any reductions in the borrower’s loan forgiveness amount based on reductions in full-time employees or reductions in employee salary/wages. Instructions on completing the form are available here.

Lenders will still have to confirm receipt of the borrower certification in Form 3508S and confirm receipt of the documentation the borrower must submit to aid in verifying payroll and nonpayroll costs.

The association has also actively sought automatic forgiveness of small dollar PPP loans for the benefit of both small businesses and credit unions that are recovering from the coronavirus pandemic and may have strained financial and human resources.

Under the new FAQs, the agencies clarify that the deferral period – enacted under the Paycheck Protection Program Flexibility Act – automatically applies to all PPP loans and lenders should notify borrowers of the change. The agency does not require a formal modification to the promissory note.

In addition, a Bloomberg article examining PPP fraud found that 75 percent of the approved PPP loans that have been connected to fraud by the U.S. Department of Justice occurred at financial technology companies. Of note, fintech companies arranged just 15 percent of PPP loans overall highlighting that while "borrower fraud doesn't mean lenders broke the rules of the program," the speed in processing loans may have had unintended consequences.

NAFCU continues to work closely with the SBA, Treasury Department, and Congress to make improvements to the PPP and secure guidance needed to ensure credit unions can lend effectively through the program.

Access NAFCU's latest PPP FAQs here.