New PPP 3508 Forgiveness Applications Include ‘EZ’ Form; No Blanket Forgiveness

Mary Ellen Biery
June 18, 2020
Read Time: min

New Paycheck Protection Program (PPP) loan-forgiveness applications rolled out from the Small Business Administration (SBA) June 17, including an “EZ” form intended to streamline the process for certain borrowers.

Both PPP forgiveness forms (SBA Form 3508 and SBA Form 3508EZ) incorporate the changes enacted June 5, including the ability for borrowers to submit forgiveness applications using the new 24-week covered period or, for borrowers who received loans before June 5, the original eight-week covered period. Both periods would begin on the PPP loan disbursement date, and in no case would the covered period end later than Dec. 31, 2020.

Neither revised form mentions ‘blanket forgiveness’

Neither revised form nor new guidance from the SBA and U.S. Treasury mentioned any kind of “blanket forgiveness” that lenders or the SBA might provide to PPP loans under a certain amount.

The new EZ form provides a shortened form for certain PPP borrowers. Those eligible to use the two-page form (the third page asks optional demographic information) must fall into at least one of the following three categories:

  1. Self-employed borrowers, independent contractors, or sole proprietors with no employees at the time of the PPP loan application; or
  2. Borrowers who didn’t reduce salary or wages of employees by more than 25% and didn’t cut the number of employees or paid hours; or
  3. Borrowers who didn’t reduce salary or wages of employees by more than 25% but were unable to operate at the same level of business activity as before Feb. 15 due to compliance with specific health and safety requirements as outlined in the PPP Flexibility Act.

The SBA estimated the time for completing the new EZ form, including gathering data needed, would be 20 minutes, compared with 180 minutes for the longer Form 3508.

While the EZ form application is technically only two pages, the SBA released four pages of instructions for it. In addition, borrowers will be required to submit much of the same supporting documentation for payroll-related expense payments and for non-payroll obligations and expenses connected to the forgiveness application as they would with the longer form. The chief difference between the EZ form and the longer Form 3508 is that the Form 3508EZ doesn’t require submission of a Schedule A (which is used to adjust forgiveness amounts for FTE and salary/wage reductions) so it doesn’t include that form or the Schedule A worksheet.

The major difference in documentation requirements for users of the EZ form appears to be related to borrowers who only fall into category #2 above (didn’t reduce salary or wages of employees by more than 25% and didn’t cut the number of employees or paid hours). For those borrowers, the Form 3508EZ Instructions say they must include documentation of “the average number of full-time equivalent employees on payroll employed by the Borrower on January 1, 2020 and at the end of the Covered Period.” Otherwise, EZ form filers don’t have to file information on FTEs.

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Updated guidance on eligible compensation

The new applications and a new Interim Final Rule (Revisions to Third and Sixth Interim Final Rule) released June 17 also updated guidance on compensation amounts eligible for forgiveness over the extended 24-week period. “For each individual employee, the total amount of cash compensation eligible for forgiveness may not exceed an annual salary of $100,000, as prorated for the Covered Period. For an 8-week Covered Period, that total is $15,385. For a 24-week Covered Period, that total is $46,154 for purposes of this 3508EZ,” the SBA said. For owner compensation (for owner-employees, self-employed individuals, or general partners), forgiven amounts for a 24-week covered period are capped at $20,833.

The longer updated Form 3508 still includes the Schedule A and Schedule A Worksheet and went from a single 11-page form that included instructions to a five-page application with a separate set of instructions that is seven pages. (Both old and revised forms include the optional demographic one-pager.) Documentation requirements remain the same for this longer form, and in general, borrowers preparing to file forgiveness applications using either of the revised forms will need to gather roughly the same materials.

“The EZ application requires fewer calculations and less documentation for eligible borrowers,” the SBA said in a news release announcing the new forms with the U.S. Treasury Department. “These changes will result in a more efficient process and make it easier for businesses to realize full forgiveness of their PPP loan.”

Lenders continue to wait for additional instruction from the SBA on several fronts, including guidance on the forgiveness process incorporating changes from the PPP Flexibility Act and most importantly, how lenders are to submit forgiveness applications once lenders approve them.

About the Author

Mary Ellen Biery

Mary Ellen Biery is a Senior Writer and Content Specialist at Abrigo.

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