“They also serve who only stand and wait.”
Sonnet 19: John Milton
Well, SBA/Treasury issued the long-awaited – and some would say overdue − Paycheck Protection Program Loan Forgiveness Application Form 3508 on Friday, May 15. As with all things PPP, the Form was posted on the Treasury website and SBA issued a news release.
Where’s the Guidance? Again, as with all things PPP, lenders are left wondering. Much like Collection of the Origination Fee and 1502 Reporting, we have yet to see guidance on how lenders are to process the application. So “In the absence of guidance …” let’s review Form 3508.
What’s Needed from the Borrower. Form 3508 provides more guidance than the Borrower Application for the PPP (Form 2438), and includes a list of documents borrowers need to provide. It is similar to a tax return form in that the borrower needs to do a Worksheet for a Schedule to be used for the Forgiveness Application.
- Much like the Loan Calculation, borrowers must exclude wages or salaries paid to independent contractors, owner employees or self-employed employees.
- Each employee can make no more than $15,385 incurred during the covered period.
- The borrower must calculate an Average Full Time Equivalency Formula, which is also capped at 1.0 for each employee. The formula is per employee/the average number of hours paid per week divided by 40 and rounded to the nearest tenth or 1.0 whichever is less.
- Finally a Salary/Hourly Wage Reduction: Another set of calculations here
When the Worksheet is complete, the borrower imports figures from the Worksheet to the Schedule, adding other costs like health insurance, retirement plan contributions and any amounts paid to owners (capped at $15,385).
Finally, the Application. Once the borrower moves all the information to the Calculation Form, they can determine the Forgiveness amount and provide it to the lender along with the following documents for processing. Lender Processing How-To: TBA.
- Payroll verification
- bank account statements or 3rd party payroll service provider reports for the covered period;
- tax forms or 3rd party payroll service provider reports for the covered period (Form 941 and state quarterly filings;
- payment receipts, cancelled checks or account statements documenting the amount of contributions to health insurance and retirement plans.
- Full-Time Employees: At the discretion of the borrower, documentation of:
- Avg # of FTE employees on payroll per month from 2/15/19 – 6/30/19;
- Avg # of FTE employees on payroll per month from 1/1/20 – 2/29/20; or
- If seasonal, the Avg # of FTE employees per month from 2/15/19 – 6/30/19; between 1/1/20 – 2/29/20; or any consecutive 12- week period between 5/1/19 and 9/15/19.
- business mortgage interest payments, copy of the lender amortization schedule and receipts or cancelled checks verifying eligible payments during the covered period or lender account statements from 2/2020 through the end of the covered period;
- business rent or lease payments: copy of current lease agreement and receipt of cancelled checks or receipts for payments during the covered period or lessor’s statements from 2/2020 through the end of the covered period;
- business utility payments: copy of invoices for the covered period along with cancelled checks or receipts.
Finally, only the Forgiveness Application, along with the documentation listed above, needs to be presented to the lender. The borrower must retain the Schedule and Worksheet for their records.
More guidance is sure to follow. Stay Tuned. And Stay Safe.