New SBA PPP Forgiveness Rules & Application

New SBA PPP Forgiveness Rules & Application


Ross Williams

6/18/2020

Dear Treasurers, Finance Chairs and Pastors,

Yesterday, the U.S. Small Business Administration (SBA) released a revised loan forgiveness application for the Paycheck Protection Program (PPP). The SBA also unveiled a new EZ application for forgiveness of PPP loans.

The applications reflect changes to the PPP made by the Paycheck Protection Flexibility Act of 2020, which became law on June 5th. The applications and instructions are available in the links below:

Congress passed this new act to make it easier for small businesses to qualify for full loan forgiveness.  Among the changes are an expansion of the “covered period” for loan forgiveness to 24 weeks from eight weeks, a reduction of the proportion of proceeds that must be spent on payroll costs to 60% from 75%, and the establishment of a safe harbor for businesses that have been unable to return to the level of business activity they had before the COVID-19 pandemic .  Also, the minimum term for loans is raised to five years for all loans made on or after June 5.  For loans made before June 5, the two-year minimum maturity remains in effect unless both the borrower and the lender agree to extend it to five years.

Application highlights

The revised PPP Loan Forgiveness Application and instructions include a number of notable items. Among them are:

  • Safe harbors for excluding salary and hourly wage reductions and reductions in the number of employees (full-time equivalents) from loan forgiveness reductions can be applied as of the date the loan forgiveness application is submitted. Borrowers don’t have to wait until Dec. 31 to apply for forgiveness to use the safe harbors.
  • Borrowers that received loans before June 5 can choose between using the original eight-week covered period or the new 24-week covered period.

New EZ application details

The EZ PPP Loan Forgiveness Application requires fewer calculations and less documentation than the full application. The EZ application can be used by borrowers that:

  • Did not reduce the salaries or wages of their employees by more than 25% and did not reduce the number or hours of their employees; or
  • Experienced reductions in business activity as a result of health directives related to COVID-19 and did not reduce the salaries or wages of their employees by more than 25%.

Sincerely,

Ross