The following information supplements our prior notes and is provided as a courtesy based on available public information; however, it is not intended nor should it be used as a substitute for appropriate accounting and legal counsel specific to your individual situation. Congress may pass new legislation and the Small Business Administration (SBA) may issue additional guidance that could change the process and calculation of loan “forgiveness.”
Freedom Bank is grateful for the opportunity to assist your business in obtaining critical funding through the Paycheck Protection Program (PPP). As a valued Freedom client, our goal is to deliver proactive updates to our clients on the PPP requirements and forgiveness process.
Yesterday evening, the Small Business Administration (SBA) published an interim final rule and a new, simplified application for PPP forgiveness for loans up to $50,000. The new two-page forgiveness application (Form 3508S) is a simple attestation and demographic questionnaire. Borrowers are still required to provide lenders with documentation supporting payroll costs or other forgivable expenses. The accompanying interim final rule declares these loans de minimis and therefore exempt from imposing the reductions normally required for borrowers' reductions in FTEs or salaries from the forgiveness amount.
Below are links to the newly available loan forgiveness application, application instructions, and the interim final rule:
Please note that if you have credential to our Forgiveness Portal, then you will be receiving updates from Fiserv as well. The company is in the process of implementing changes in its portal solution to address the new forgiveness application and requirements. Recall that forgiveness can only be obtained from the SBA through a portal solution. We encourage you to register if you have not done so already. We have been informed that the SBA is working on its own Forgiveness Platform (both UI and API) to support the new 3508S form, so we do not yet have a timeline for release.
Additionally, the SBA and Treasury Department have updated the PPP FAQs to address the deferral period extension granted by the PPP Flexibility Act of 2020. The extension allows borrowers to defer payments of principal, interest, and fees on PPP loans for 10 months. As long as a borrower submits its loan forgiveness application within ten months of the completion of the Covered Period, the borrower is not required to make any payments until the forgiveness amount is remitted to the lender by the Small Business Administration (SBA). You will continue to receive a loan statement but no payment will be required during this deferral period as your loan forgiveness application is processed.
If the loan is fully forgiven by the SBA, the borrower is not responsible for any payments. If only a portion of the loan is forgiven, or if the forgiveness application is denied, any remaining balance due on the loan must be repaid by the borrower on or before the maturity date of the loan. If the borrower does not apply for loan forgiveness within 10 months after the last day of the covered period, the borrower must begin paying principal and interest no earlier than 10 months from the last day of the covered period. Interest accrues during the time between the disbursement of the loan and SBA remittance of the forgiveness amount.
The borrower, in addition to the unforgiven principal amount of the loan, is responsible for paying the accrued interest on any such amount. The lender is responsible for notifying the borrower of remittance by the SBA of the loan forgiveness amount (or that the SBA determined that no amount of the loan is eligible for forgiveness) and the date on which the borrower’s first payment is due, if applicable. Previously, the deferral period ended after 6 months. You can review the updated FAQs here.
Freedom Bank has joined industry groups, such as the Virginia Bankers Association, in continually advocating for streamlined forgiveness for PPP loans through administrative and Congressional action. This is the latest sign of progress on those efforts after the earlier adoption of the Form 3508EZ. We will continue to provide updates and seek further clarification and changes as needed to assist you through this process.
If you have any questions or would like further assistance, please contact me directly at the contact information listed below!
Please Note: E-mail is not a secure form of communication. Please do not send any confidential information using this form. This includes account numbers, social security numbers and password or PIN information.