As part of the $900 billion COVID-19 relief bill recently signed into law on December 27, Congress extended the Paycheck Protection Program (PPP), an initiative designed to incentivize small businesses to keep workers on payroll. In contrast to the original law, which only authorized a simplified forgiveness process for loans of $50,000 or less, the option has been expanded to loans of $150,000 or less. According to Small Business Administration (SBA) data, “. . . loans of $150,000 or less represented 87.4% of the number of PPP loans, or 28.2% of the aggregate value of PPP loans, made through August 8, 2020.”[1]

Like the original legislation, “[t]he borrower must seek forgiveness. It is not automatic.”[2] The SBA has 24 days after the enactment of the law to create a one-page loan forgiveness certification form that includes:

  • A description of the number of employees the recipient was able to retain because of the PPP loan
  • The estimated amount of the PPP loan spent by the recipient on payroll costs
  • The total PPP loan value [3]

The PPP borrower will receive forgiveness simply by completing the form and maintaining records to substantiate how funds were spent.

The forgiveness process is more straightforward than what existed with the previous law because it no longer requires borrowers taking loans of $150,000 or less to submit documentation substantiating their claim for forgiveness. Borrowers no longer need to complete the laborious Form 3508 that requires extensive calculations and supporting documentation or the intermediate Form 3508-EZ that has specific eligibility requirements.  Unlike loans exceeding $150,000, which require borrowers to retain certain supporting documentation for up to six years, borrowers will only be required to retain employment records for four years and other records for three years.[4] Similar to the aim of the original PPP program, the new legislation requires that a minimum of 60 percent of the loan proceeds must be used on employee payroll costs. Finally, Sec. 307 asserts that qualified borrowers ($150,000 or less) are not required to submit any supplementary documentation in addition to the signed certification at the time of their application for forgiveness.

It is important for borrowers to be aware that “. . . while the forgiveness application is simplified, all existing rules still apply. Rather than going through the process of showing how borrowers arrived at certain numbers, the simplified application merely asks borrowers to self-certify. Given the liability attached to making a false certification to the SBA, all borrowers who submit this simplified application should check their responses by at least filling out, in draft form, the long-form application to ensure that the certifications made on the simplified form are true and correct.”[5]

[1] “Another Round of PPP Loans Approved by Congress, With Yet Additional Changes to the Program,” Perkins Coie, December 24, 2020, <https://www.perkinscoie.com/en/news-insights/another-round-of-ppp-loans-approved-by-congress-with-yet-additional-changes-to-the-program.html>
2 Petruska, Paul, “What Small Businesses Should Know about Round 2 PPP Funding,” Greensfelder, December 23, 2020, <https://www.greensfelder.com/newsroom-publications-round-2-PPP-funding.html>
3 Zalay, Michael and Schwartz, Jeffrey, “Paycheck Protection Program Round 2: The Highlights,” The National Review, December 29, 2020, <https://www.natlawreview.com/article/paycheck-protection-program-round-2-highlights>
4 Perkins Coie
5 Zalay and Schwartz