Updated PPP 3508S, EZ Forms, Guidance; New 3508S Not Quite ‘Blanket Forgiveness’

Mary Ellen Biery
January 24, 2021
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Note: This post has been updated to incorporate changes from the Economic Aid Act.  

New and updated Paycheck Protection Program (PPP) loan-forgiveness applications have been rolled out from the Small Business Administration (SBA), including one that borrowers and lenders have long sought to cover loans of $150,000 or less. The SBA also updated loan forgiveness requirements and loan review procedures to reflect many of the changes passed in the Economic Aid to Hard-Hit Small Businesses, Nonprofits, and Venues Act, or the Economic Aid Act.

New eligible expenses, lender-reporting requirements

Among the forgiveness-related updates included in the recent interim final rule and a lender notice were new borrower-notification and reporting requirements for lenders as well as:

  • the expanded list of non-payroll expenses for which borrowers can use loan proceeds and still receive loan forgiveness
  • information on the ability of borrowers to receive forgiveness for second draw loans of up to $2 million under certain circumstances
  • guidance on the ability of borrowers to choose any period between 8 and 24 weeks for spending the loan proceeds (the “covered period”) instead of having to choose either an 8-week period or a 24-week period
  • a more flexible option for seasonal employers in choosing a reference period when comparing their employee headcounts or wages to pre-COVID-19 numbers as part of determining if they have met requirements to maintain payrolls in order to receive loan forgiveness
  • confirmation that Economic Injury Disaster Loan (EIDL) advances will no longer be deducted from forgiven loan amounts and that previously deducted advances will be remitted to lenders with interest.

Aside from the change to EIDL advance deductions, most of the other revisions to the forgiveness process in the new guidance apply to new loans or loans for which the SBA hadn’t remitted forgiveness payments as of Dec. 27, 2020.

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Form 3508S and resubmitting forgiveness for loans ≤ $150k

The updated SBA Form 3508S, intended by lawmakers to be used by most PPP borrowers of $150,000 or less for first or second draw loans, doesn’t require borrowers to show calculations or submit documentation like the other forms (SBA Form 3508EZ and SBA Form 3508, which were also updated). If the SBA decides to review or audit the loan, however, borrowers using Form 3508S would be required to produce the documents and calculations.

In addition, even though those who long sought a streamlined process for loans of $150,000 or less loans often referred to it as “blanket forgiveness” or “automatic forgiveness,” Form 3508S has important requirements for the loan to be fully forgiven. As they must with other PPP forgiveness forms, borrowers must certify on Form 3508S that they have complied with all PPP requirements, including spending the loan on eligible expenses and generally maintaining employee numbers and pay. Only borrowers with loans of $50,000 or less are exempt from any reductions to the loan forgiveness amount based on reduced FTEs or worker salaries or wages.

Borrowers that use the 3508S for a second draw PPP loan must also submit or have already submitted all required documentation showing a 25% drop in revenue reduction. And they must have used all first draw PPP loan amounts on eligible expenses prior to disbursement of the second draw loan.

Indeed, the one-page form sounds simple enough, but it comes with an optional demographic form and four pages of instructions. Borrowers must provide what covered period they have chosen, the amount of the loan spent on payroll costs, and the requested loan forgiveness amount. The previous 3508S form, which could have only been used for loans of $50,000 or less, only asked for the forgiveness amount but required the borrowers to show the lender documentation verifying payroll costs and the existence of eligible non-payroll costs.

If a borrower of $150,000 or less has already applied for forgiveness using Form 3508 or Form 3508EZ and wants to re-apply using the updated Form 3508S, they can, as long as the SBA hasn’t:

  1. already provided the PPP loan forgiveness payment to the lender or
  2. already notified the lender of a final SBA loan review decision.

SBA Procedural Notice 5000-20077 says that to resubmit a forgiveness application under those conditions, the borrower should submit a Form 3508S to the lender, and the lender should request the withdrawal of any lender forgiveness decision by notifying the SBA on its SBA Paycheck Protection Platform. The lender then has 60 days to notify the SBA of the decision on the new, complete application on Form 3508S. SBA should then remit the forgiveness amount plus interest accrued through date of payment within 90 days, assuming no review of the loan or loan application.

New requirement to upload notifications to SBA platform

The same procedural notice also outlined new lender responsibilities to not only notify borrowers of certain actions during the PPP forgiveness process, but also to upload copies of the correspondence to the SBA Paycheck Protection Platform. The notice detailed specific information lenders must include in their notifications. Lenders have already been required to notify borrowers of certain actions related to forgiveness, but under the new rules, lenders must notify borrowers in writing and then upload copies of the notification to the platform of the following:

  • A lender decision to deny forgiveness in full
  • An SBA decision to decline a borrower’s request to review the lender’s decision to deny forgiveness in full
  • A final SBA loan review decision (including an SBA review of forgiveness decisions)
  • Remittance in full or in part by SBA to the lender of the loan forgiveness amount

Lenders are required to send the borrower notifications within five days of any of the decisions or actions listed above.

Also related to borrower notifications, PPP lenders via SBA Procedural Notice 5000-20075 on Jan. 8 were provided requirements related to notifying borrowers who have previously had EIDL advances deducted from their forgiveness amounts. The SBA said in the notice it would no longer deduct EIDL advances from the forgiveness payments remitted to lenders beginning with those with a status of "Payment Confirmed" as of Dec. 29, 2020. Without providing a timeline, the SBA also said then it would begin identifying previous forgiveness payments that had been reduced by EIDL advances and automatically remit reconciliation payments to PPP lenders. Once a payment was sent to the lender, the SBA said, the lender would be responsible to:

  1. Notify the borrower of the reconciliation payment
  2. Re-amortize the loan and notify the borrower of the next payment due or advise the borrower the loan has been paid in full, whichever is applicable, or
  3. If the the amount remitted by SBA to the lender exceeded the remaining principal balance of the PPP loan, remit the excess amount (including accrued interest paid by the borrower) to the borrower.

Other forgiveness forms updated

As noted above, in addition to the SBA Form 3508S form, regulators issued updated instructions and SBA Form 3508EZ, and updated instructions and SBA Form 3508. As with the changes to guidance, most of the changes to forms were to incorporate the changes related to the newly allowed non-payroll expenses, new dates, second draw loans, etc. In addition, the updated forms clarify that:

Form 3508 and Form 3508EZ both noted that for a second draw PPP Loan in excess of $150,000, borrowers must submit a loan forgiveness application for the first draw PPP Loan before or simultaneously with the loan forgiveness application for the second draw PPP Loan, even if the calculated amount of forgiveness on the first draw PPP loan is zero.

Here are the main differences between each type of form:

Form 3508: The longest form, updated Form 3508, includes the Schedule A, which is used to adjust forgiveness amounts for FTE and salary/wage reductions, and the Schedule A Worksheet. At 13 pages, including instructions (and the optional demographic one-pager), it is used for borrowers with many employees who need to work through, employee by employee, the calculation of payroll costs and show itemized non-payroll costs and adjustments for reductions in workers or wages.  

Form 3508 EZ: At nine pages, including instructions, Form 3508EZ form is intended for borrowers of more than $150,000 via first or second draw PPP loans who fall into at least one of the following two categories:

  1. 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
  2. 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.

In general, documentation requirements are the same for borrowers preparing to file forgiveness applications using either Form 3508 or Form 3508EZ. Borrowers are required to submit supporting documentation for payroll-related expense payments and for non-payroll obligations and expenses. The chief difference between the EZ form and the longer Form 3508 is that 3508EZ doesn’t require submission of a Schedule A, so it doesn’t include that form or the Schedule A worksheet.

The major difference in documentation requirements for users of the EZ form and the longer Form 3508 is related to borrowers who only fall into category #2 above (they 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.

About the Author

Mary Ellen Biery

Senior Writer and Content Specialist
Mary Ellen Biery is Senior Staff Writer & Content Specialist at Abrigo, where she works with advisors and other experts to develop whitepapers, original research, and other resources that help financial institutions drive growth and manage risk. A former equities reporter for Dow Jones Newswires whose work has been published

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Abrigo enables U.S. financial institutions to support their communities through technology that fights financial crime, grows loans and deposits, and optimizes risk. Abrigo's platform centralizes the institution's data, creates a digital user experience, ensures compliance, and delivers efficiency for scale and profitable growth.

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