SBA Simplifies Forgiveness for Borrowers with PPP Loans of $50,000 or Less

On October 8, 2020, the U.S. Small Business Administration (“SBA”) posted a twenty-fifth Interim Final Rule on Additional Revisions to Loan Forgiveness and Loan Review Procedures Interim Final Rules. This Interim Final Rule supplements previously posted interim final rules for the Paycheck Protection Program (“PPP”) by providing additional guidance concerning (1) the forgiveness and loan review processes for PPP loans of $50,000 or less and (2) for PPP loans of all sizes, the lender’s responsibilities with respect to the review of borrower documentation of eligible costs for forgiveness that are in excess of the borrower’s PPP loan amount. This Interim Final Rule is effective without advance notice and public comment because section 1114 of the CARES Act authorizes SBA to issue regulations to implement Title I of the CARES Act without regard to notice requirements.

Alternative Loan Forgiveness Application

In connection with this interim final rule, SBA is issuing an alternative PPP Loan Forgiveness Application Form 3508S (or lender’s equivalent form) and instructions for use by borrowers applying for loan forgiveness on PPP loans with a total loan amount of $50,000 or less. However, if a borrower along with it affiliates (see SBA affiliation rules) received PPP loans of $2 million of more in total, they cannot use this form to apply for loan forgiveness. Form 3508S requires fewer calculations, less documentation to be provided, and borrowers do not have to show the calculations used to determine their loan forgiveness amount. SBA may still request information and documents to review these calculations as part of its loan review process.

Reductions to Loan Forgiveness Amount

A borrower that uses Form 3508S is exempt from any reductions in the borrower’s loan forgiveness amount based on reductions in full-time equivalent (FTE) employees or reductions in employee salary or wages (section 1106(d)(2) and (3) of the CARES Act) that would otherwise apply. The SBA Administrator and the Treasury Secretary determined that these exemptions are appropriate based on their joint rulemaking authority to grant de minimis exemptions under the CARES Act, and they believe that these additional exemptions are consistent with the purposes of the CARES Act, including to provide much-needed financial assistance to a broad range of small businesses, and provide borrowers appropriate flexibility in the current economic climate. The Interim Final Rule provides PPP data and other reasons to further justify why the SBA Administrator and the Treasury Secretary authorized these exemptions for borrowers with loans of $50,000 or less.

Borrower Submission of Excess Costs

In some cases, a borrower may submit documentation to a lender of eligible payroll and nonpayroll costs that exceed the amount of the borrower’s PPP loan. This Interim Final Rule confirms that the amount of loan forgiveness that a borrower may receive cannot exceed the principal amount of the PPP loan. Whether a borrower submits SBA Form 3508, 3508EZ, 3508S (or lender’s equivalent form), a lender should confirm receipt of the documentation the borrower is required to submit to aid in verifying payroll and nonpayroll costs, and, if applicable, confirm the borrower’s calculations on the borrower’s Loan Forgiveness Application, up to the amount required to reach the requested Forgiveness Amount.


While this Interim Final Rule does not automatically provide forgiveness for borrowers with PPP loans of $50,000 or less, these new guidelines further simplify the forgiveness process by reducing the number of required calculations that need to be performed on the forgiveness application (i.e., only need to calculate eligible payroll and nonpayroll costs paid or incurred during the covered period (or APCP)) and the amount of documentation that needs to be provided to the lender. The borrower no longer has to calculate reductions in FTE employees or employee salary or wages for purposes of determining loan forgiveness, as they are now exempt from these reductions.


For additional information on the Paycheck Protection Program, as well as other Federal, state and local relief measures, please visit our COVID-19 Resource Center on our website. If you have any questions, please contact your Tronconi Segarra & Associates advisor or a member of our response team at


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