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Sean Bryan Authors Article on New Interim Final Rule for PPP Loan Forgiveness for Owner-Employees and Non-Payroll Items

Sean Bryan’s column—entitled “Paycheck Protection Program Simplifies Forgiveness for Small Borrowers and Confirms Certain Lender Review Responsibilities”—addresses supplemental PPP information and clarity on loan forgiveness documentation.

On October 8, 2020, the SBA and US Treasury issued a new Interim Final Rule to simplify the loan forgiveness process for borrowers with PPP loans of $50,000 or less (unless aggregate PPP loans with affiliates equal or exceed $2 million) through the use of new Loan Forgiveness Application 3508S (link below).  Unlike larger loans, any reduction in employees or salaries will not affect the forgiveness of these small loans, so the worksheets and calculations relating to such reductions found in Form 3805 and Form 3805EZ are eliminated, which will reduce both borrower and lender time spent on the forgiveness application.  The only information required is (i) the loan amount, (ii) the number of employees at both the time of the loan application and the time of the forgiveness application, and (iii) the amount of forgiveness requested.  This does not, however, negate the obligation to provide the lender with verifying documentation for the amounts for which forgiveness is requested. 

Additionally, the new Rule clarifies that if a borrower submits documentation for payroll and non-payroll costs that exceed the PPP loan (regardless of the size of the loan or the forgiveness application submitted), then the forgiveness is limited to the PPP loan balance.  The lender is expressly required to confirm receipt of required documentation and confirm the borrower’s calculations.

At the same time, the SBA added new FAQ 52 stating that because the extension of the interest deferral on PPP loans from 6 months to 10 months after the end of the covered period was statutory, the extension applies automatically and lenders are not required to formally modify the promissory note but that lenders are required to notify borrowers of the change in the deferral period.

Link to Interim Final Rule:   
Link to Form 3805S:
Link to Instructions to Form 3805S:


Marianne M. Auld
Managing Partner

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