February 5, 2023

Volume XIII, Number 36

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February 03, 2023

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February 02, 2023

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SBA Issues Fresh Guidance and Streamlined Forgiveness Application

On June 16, the Small Business Administration released an updated PPP Loan Forgiveness Application (SBA Form 3508) and a simplified version for certain eligible borrowers (SBA Form 3508EZ), both reflecting program changes implemented by the recently-enacted Paycheck Protection Program Flexibility Act. Additionally, the SBA and Treasury continue to release Interim Final Rules and guidance regarding the PPPFA, including a recent IFR that confirms PPP loans remain eligible for partial forgiveness even if less than 60% of the proceeds are used for payroll expenses.

Notably, the PPPFA-implemented change increases the amount of the loan that may be used for eligible nonpayroll expenses. Prior to the PPPFA, only 25% of the loan amount could be used for nonpayroll expenses. Now, borrowers may spend up to 40% on nonpayroll costs, and as long as at least 60% of the loan proceeds are spent on payroll costs,  the entire loan may be forgiven. If less than 60% of the loan proceeds are spent on payroll costs, the forgiven amount will be reduced accordingly.

According to the application instructions for Form 3508EZ, borrowers are eligible to use the simplified two-page loan forgiveness application if they fall into one of the following three categories:

  • The borrower is a self-employed individual, independent contractor, or sole proprietor with no employees at the time of the PPP loan application.
  • The borrower did not reduce any employee salary by more than 25% and did not reduce the number of employees or the average paid hours of employees during the loan period.
  • The borrower did not reduce any employee salary by more than 25% and was unable to operate, or was operating at a lower level of business activity, during the loan period due to compliance with sanitation, social distancing, or any other safety requirements or guidance related to COVID-19.

All other borrowers must use Form 3508, which contains additional schedules and worksheets primarily to account for employee and salary reductions.1

While the SBA and Treasury continue to release new guidance since the passage of the PPPFA, several important issues remain unresolved. Significantly, although the loan period has been extended to 24 weeks, as opposed to 8 weeks under the original PPP legislation, the SBA has not made clear if employers must calculate forgiveness amounts using the full 24-week period even if the loan funds are spent in a shorter timeframe. We expect additional forthcoming SBA guidance to address these issues. 

Bracewell’s cross-disciplinary COVID-19 task force is actively helping numerous clients navigate the many and evolving issues they are facing, including potential access to stimulus programs. Your Bracewell point of contact can help you learn more.

1 The instructions for Form 3508 can be found here.

© 2023 Bracewell LLPNational Law Review, Volume X, Number 170

About this Author

David Ball, Intellectual Property Attorney, Bracewell Giuliani, law firm

David J. Ball is a partner in Bracewell's litigation practice. David has experience in the areas of intellectual property litigation (patent, copyright, trademark, trade dress, and IP theft), bankruptcy litigation, and state and federal appeals.  He also regularly represents financial services firms (international banks, regional banks, hedge funds, etc.) in complex commercial disputes.  David routinely draws on his litigation experience to counsel clients in all manner of business transactions, including risk analysis, contract formation, mergers and acquisitions, and...

David Shargel, commercial litigation, white collar criminal defense attorney, Bracewell Law firm

David Shargel is a senior counsel in the trial section of Bracewell's New York office. His litigation practice focuses general commercial litigation, internal investigations and white collar criminal defense. Mr. Shargel's practice also involves issues surrounding electronic discovery and data management.

Mr. Shargel has litigated complex commercial disputes involving contract, business torts, insurance coverage, technology and fraud, and has litigated disputes concerning federal and state constitutional law, including the Commerce and Due...

Rachel goldman, complex commercial litigation, attorney, Bracewell law

Rachel Goldman is an experienced litigator in both federal and state courts, at the trial and appellate levels. Her practice focuses on complex commercial matters, including claims for breach of contract, post-acquisition disputes, class actions, False Claims Act cases, insurance coverage disputes, contested bankruptcy matters, challenges under the Commerce Clause and the Supremacy Clause, government regulation, securities litigation, construction law, First Amendment and libel actions. Additionally, Rachel's tenure as in-house counsel provides a valuable perspective of...

Joseph T. Lasher Complex Commercial Litigation Attorney Bracewell New York, NY

Joseph Lasher focuses his practice on complex commercial litigation matters and contractual disputes. He advises clients through all phases of the litigation process, including motion practice, trial, and settlement.

Joseph previously served as judicial intern to the Honorable Nanette Laughrey of the U.S. District Court for the Western District of Missouri. He also worked at the Duke Health Justice Clinic as a certified law student, representing clients in disability cases.