The Small Business Administration (“SBA”) released two new applications for PPP loan forgiveness on June 18, 2020, which mirror recent revised requirements for PPP loans. Due to widespread criticism of the original forgiveness application’s complexities, these modifications were implemented in efforts to make the borrower’s forgiveness process easier. Both the “EZ” application, for certain borrowers, and the revised standard forgiveness application are shorter and more user-friendly. The SBA has also established a helpline to aid borrowers in completing their applications.
The EZ application: (Form 3508EZ)
The EZ application is a two-page form which allows borrowers flexibility by requiring fewer documents and calculations. To use the EZ application, borrowers must be: (i) self-employed individuals with no employees, (ii) businesses who did not reduce pay for their employees by more than 25% and did not reduce workforce or work hours, or (iii) borrowers whose business decreased because of COVID-19 and did not reduce employee’s pay more than 25%.
The Revised Full Forgiveness Application
If a business does not qualify for the EZ application, the revised forgiveness application has now been reduced from eleven to four pages. In addition to the reduction in length, a number of changes to the application were modified including:
- Borrowers receiving loans before June 5, 2020 may choose between the eight-week or the twenty-four-week “cover period,” which is the amount of time in which the funds must be spent;
- Additionally, for loans made before June 5, 2020, the two-year minimum maturity on the loan remains, absent agreement of both borrower and lender. For the loans on or after June 5, 2020, the minimum term is five years.
- The PPP loan under the new twenty-four-week “cover period” allows loan forgiveness for payroll costs for up to $20,833.00 per individual, which may not exceed two and a half months’ worth of 2019 compensation for any owner employee or self-employed individual/general partner, instead of the previous $15,385 applicable to the eight-week cover period.
- The amount of funds that must be spent on payroll costs has been reduced to 60%, instead of 75%, allowing borrowers more leeway and discretion.
- Borrowers no longer must wait until December 31, 2020 to apply for forgiveness to use the safe harbor of excluding salary and hourly wage reductions and decrease in the number of full-time employees from loan forgiveness. The safe harbor may be applied as of the date the loan forgiveness application is submitted.
- S-Corporations may not include health insurance costs for owners when calculating payroll costs.
- The application deadline for PPP loans remains June 30, 2020.
Due to evolving changes of COVID-19, matters related to PPP loans are continuously adjusting. Thus, staying updated and informed on the latest information will allow small businesses to cope properly. For further information on the New PPP Loan Applications, check out the Small Business Administration site here.