PPP Forgiveness Underway With New Rules for Loans Less Than $50,000

Cleveland, TN: After substantial delays, lenders across the country are now accepting forgiveness applications for loans obtained through the CARES Act. Under the massive stimulus legislation passed in late March 2020, the Paycheck Protection Program (PPP) provided assistance to small businesses, including churches and other nonprofits, of up to 2½ times the monthly payroll for the entity involved. Initially designated as a loan, the legislation provided that the loan could be forgiven if used for “covered“ expenses during a specified timeframe.


While the “covered period” has ended for many entities who received PPP loans, the forgiveness process has not been opened until recently. The Small Business Administration (SBA), the administrator of this program, had delayed the forgiveness process, awaiting further legislative guidance from Congress. It had been expected that Congress would grant blanket forgiveness to certain borrowers. While it was proposed that all loans under $150,000 would be automatically forgiven, that legislative action never materialized.


Therefore, in recent days the SBA has begun accepting forgiveness applications from participating banks that made PPP loans. Although the application for forgiveness must go through the borrower’s bank, the SBA has final approval authority over any forgiveness application.


Since no blanket forgiveness provision was passed by Congress, the SBA has not only started the forgiveness process, but they have also provided for a simplified forgiveness application for those who received PPP loans of less than $50,000. While documentation of expenditures are still required, the application for those with loans of less than $50,000 has been modified to require answers to only a few questions. It is expected that this new simplified process, using Form 3508S, will greatly expedite forgiveness under the PPP program.


All churches who received loans of less than $50,000 should use the Form 3508S forgiveness application. Please note that the affiliation rules mentioned at the top of the new simplified forgiveness application do not apply to churches.


Most lenders will have the simplified application form available electronically within the next few days. While the local church should seek forgiveness as soon as possible, an applicant has up to 10 months after their “covered period“ ends to apply for forgiveness. Therefore, time is available to collect all documentation needed to receive complete forgiveness of the PPP loan.

Additional information about the forgiveness process can be found on the Small Business Administration’s website at www.sba.gov.