PPP: Does loan size affect eligibility for Form 3508EZ? | Bryan Cave Leighton Paisner
No. PPP borrowers of any size can use form 3508EZ, assuming they meet the eligibility requirements of this form.
(Note: this is a first in what we expect to be a series of messages regarding Paycheck Protection and Loan forgiveness questions. A list of questions addressed so far is also available on our PPP Resource Page. These questions and our answers are based on discussions with colleagues and clients, both lenders and borrowers. Our intention is to cover questions which, although potentially frequently asked, are not explicitly addressed in the official FAQs or directly in the provisional final rules. Our responses may ultimately be subject to change as additional guidance is provided, but reflect our regulatory perspective at the time of publication.)
The US Treasury Department and the Small Business Administration have provided two forms for requesting a paycheck protection loan exemption, and lenders have the option of developing their own comparable forms. The standard form, Form 3508, and the “simplified” form, Form 3508EZ, are available on the Treasury website, accompanied by instructions.
To note: At present, there appears to be bipartisan support in Congress for additional forgiveness relief for borrowers of $ 150,000 or less, potentially indicating a route to seek forgiveness without completing Form 3508 or Form 3508EZ. While the action on such relief seems linked to the debate on other issues, there is currently no urgency to request a forgiveness, as all PPP loan payments are deferred until the SBA repays the lender the amount of the loan forgiveness or 10 months. after the end of the relevant covered period if no request for postponement is filed. As a result, smaller PPP borrowers may wish to delay filing any rebate requests at this time.
The 3508 and From 3508EZ forms are very similar, but differ in two ways: eligibility and required support information. Notably, one area where they are different is that both forms require a borrower to indicate whether he, along with his affiliates, has received PPP loans over $ 2 million. This question would appear to signal the loan for further SBA review, per FAQ 39, which stated that the SBA would review all such loans independently. Accordingly, filing using Form 3508EZ will not avoid such a review and is likely permitted for borrowers with loans greater than $ 2 million. However, as part of such a review, the borrower may be required to provide additional information.
Form 3508EZ is available for three categories of PPP borrowers:
- Borrowers who are self-employed, independent contractors or sole proprietors who had no employees at the time of the loan application and did not include any employee wages in the calculation of the average monthly payroll in their PPP loan application.
- Borrowers who have not reduced the annual salary or hourly wage by more than 25% for any employee earning less than $ 100,000 and have not reduced the number of employees or the average paid hours between January 1, 2020 and the end of the applicable covered period (ignoring some qualified reductions).
- Borrowers who have not reduced annual or hourly wages by more than 25% for any employee earning less than $ 100,000 and have not been able to operate at the same level of activity due to COVID-19 guidelines.
We have already written on the uncertainty regarding the use of the Safe Harbor for an inability to operate at the same commercial level due to COVID-19 guidelines. However, for borrowers in eligibility categories # 1 or # 2 above, we are not aware of any negative elements in choosing to file an application on the 3508EZ form.
Basically, the main difference between forms 3058 and 3508EZ is the supporting documents and the documents for calculating reimbursable expenses. Specifically, the 3508EZ form does not require you to complete the PPP Schedule A or the PPP Schedule A worksheet. In addition, PPP Borrowers submitting Form 3808EZ do not need to submit supporting documents showing equivalent FTE calculations for the applicable reference period.
As the 3508EZ form requires less documentation, it also reduces the burden and potential liability on lenders when considering these PPP forgiveness requests. As a result, we would expect most PPP lenders to prefer receiving Form 3508EZ.
Borrowers who choose to rely on Form 3508EZ should always keep supporting documentation ready in case the lenders or the SBA ask for additional information. Given the planned review of all PPP loans over $ 2 million, these borrowers should be especially careful about keeping these documents.