By: Scott Borsack
Late last week the Small Business Administration released additional guidance under the Paycheck Protection Program affecting borrowers with loans of no more than $50,000. The SBA created another forgiveness application form (3508S) for eligible borrowers which exempts them from the potential reductions in the amount of spending eligible for forgiveness. Borrowers using this form do not have to demonstrate compliance with the Full Time Equivalent test or the Salary Reduction test. So an employer with fewer FTEs in the covered period who faced a reduction in spending eligible for forgiveness no longer has to be concerned for that, where the loan in question was no more than $50,000. Likewise where salaries during the covered period were reduced by more than 25% of the rate employees were paid in the first quarter of 2020 there will be no reduction in the forgiveness amount. This should prove to be very useful for employers with small loans who hired new staff during the covered period. Borrowers still need to provide the SBA with proof that they spent the proceeds on eligible expenses (payroll, rent, mortgage interest, utility charges, etc).
We continue to watch developments from Washington, expecting to see an exemption for all loans of no more than $150,000. Stay tuned.
Attached is a copy of the new Form 3508S for eligible borrowers to use in the process of seeking forgiveness.
Please note that the content of this blog is provided for information and education only. Nothing stated herein is intended to create an attorney client relationship or to constitute legal advice.
Scott Borsack is a partner with Szaferman Lakind and chair of the Business Department. To contact Scott please email him at email@example.com or call 609.275.0400.