On the evening on October 8, 2020, the Small Business Administration (SBA) in conjunction with the U.S. Treasury issued additional guidance for small Paycheck Protection Program (PPP) loans of $50,000 or less, along with a new PPP loan forgiveness application, Form 3508S. This new form creates a more simplified application process for smaller PPP borrowers and also allows such borrowers to still qualify for full loan forgiveness even if they have a reduction in full time equivalency (“FTEs”) or salary amounts.

To qualify to use the new form, the borrower must have received a PPP loan of $50,000 or less. Further, a borrower that, together with its affiliates received PPP loans of $2 million or greater cannot use the new form. The new Form 3508S contains an expiration date of October 31, 2020, thus, it is unclear if the SBA and Treasury intend for this new form to be available for smaller borrowers that are still using the PPP loan proceeds (i.e., their “covered period” has not expired yet) beyond the stated October 31, 2020 expiration date.

Small borrowers meeting the $50,000 threshold can still qualify for full loan forgiveness even if they have reduced either or both FTEs and salary amounts that would otherwise result in a reduction in loan forgiveness (i.e., the SBA and Treasury determined that smaller borrowers meeting the Form 3508S eligibility test should be exempt from the reduction penalties that would otherwise result from a reduction in FTEs or salary levels. The new Form 3508S application form contains certain certifications that the borrower must sign including statements that the PPP loan proceeds were used for otherwise eligible payroll and non-payroll costs. Further, the borrower must still submit documentation such as payroll records that verify the costs included in the PPP loan forgiveness application.