PPP Loans Over $2 Million - Forgiveness Guidance

PPP Loans Over $2 Million - Forgiveness Guidance

Questions continue to surround the forgiveness aspect of Paycheck Protection Program (PPP) loans – the $659 billion program administered by the Small Business Administration (SBA) aimed at COVID-19 related job retention for U.S. small businesses.

Almost 70 percent of the 5.2 million loans issued were loans under $50,000 and on October 8, 2020, the SBA released a simplified loan application for these borrowers.

Less than one percent of PPP loans were for loans over $2 million, but they accounted for more than 14% of distributed funds. On October 26, the SBA announced the process it will use for this group of borrowers to evaluate good-faith certifications made on their original loan applications.

Forms 3509 and 3510
For loans over $2 million, the process begins once the lender has submitted its forgiveness decision to the SBA. The SBA will send a notification letter to the lender requesting that the borrowers complete a questionnaire and provide requested documentation. For-profit entities will use Form 3509 and non-profit groups will use Form 3510. While these forms are not currently available on the Treasury or SBA websites, they have already been distributed to some PPP borrowers.

Both forms are comprised of nine pages with two sections, a Business Activity Assessment and a Liquidity Assessment. The Business Activity Assessment seeks revenue details and business ramifications due to COVID-19 restrictions. The Liquidity Assessment specifically addresses the cash position of the borrower including outstanding debt, capital distributions and book value of the businesses before the PPP loan was issued. The questions are primarily Yes and No questions with space for up to 1,000 words of additional details or context.

Forgiveness Process
Forms 3509 and 3510 must be completed and submitted within 10 days of receiving the relevant form from their lender. The SBA may then request additional information before issuing a forgiveness decision. Failure to complete the form could result in the SBA’s determination that the borrower was ineligible for the loan, the loan amount or the forgiveness amount, causing the SBA to potentially seek loan repayment. Given the short turnaround time to submit these forms, we recommend borrowers with aggregated loans of $2 million or more start gathering the information required by these forms, so they are prepared to respond timely when they receive the official request.

Continued Clarification
PPP loan forgiveness details continue to evolve. For the latest information, go to the SBA’s PPP loan forgiveness online site: https://www.sba.gov/document/sba-form-paycheck-protection-program-loan-forgiveness-application or reach out to us at info@herbein.com.