What are the updated SBA Paycheck Protection Program (PPP) Loan Forgiveness Rules and PPP EZ Loan Forgiveness Application?

Updated 06/23/2020

As of June 5, 2020, a new bill was signed into law by the President to expand the PPP loan forgiveness rules. The Paycheck Protection Program Flexibility Act includes changes that should bring a sigh of relief for business owners who continue to struggle to get back on their feet in the wake of COVID-19.

If you haven’t yet applied for PPP, you can contact your business bank, credit union, or approved SBA lender to submit your application. For small business owners seeking financial support due to the Coronavirus Pandemic, the Paycheck Protection Program (PPP) still has funds available after the second round of financial relief.

This federal program is part of the CARES Act (Coronavirus Aid, Relief, and Economic Security) that was signed by the President into law in late March. The PPP has been designed to help small business owners retain employees during the coronavirus pandemic.

We outline some of the provisions that have been revised as part of the PPP loan forgiveness rules.

What are the PPP Loan Forgiveness Rules Updates?

Here’s a high-level summary of some of the key changes:

1. Borrowers have the option to extend the 8-weeks to 24-weeks for payroll costs to retain and rehire employees
2. The 75% required to be used on payroll expenses has been reduced to 60% of the total loan amount. In addition, the cap for forgivable, non-payroll expenses has increased from 25% to 40%
3. The June 30^th deadline for penalties and calculations for reductions in workforce has been extended to December 31^st
4. Additional exceptions where the borrower made good faith effort and can document one of the following situations:
   1. The employer unable to rehire former employees or similarly qualified new employees, or the business was unable to restore business operations due to federal health guidelines and/restrictions related to COVID-19
5. Extended loan repayment period from 2 years to 5 years. This maintains an interest rate of 1%
6. Borrowers will be eligible for a 2-year deferral of employer’s share of Social Security payroll taxes

What is the new PPP EZ Loan Forgiveness Application?

The PPP Loan Forgiveness Application Form 3508EZ is now available. This EZ form is much easier – there’s less documentation and fewer calculations required.

You can download from the treasury.gov website or here: PPP EZ Loan Forgiveness Application.

There is a checklist available to help you fill out your loan forgiveness application form. These instructions also provide guidance on the documents you will need to include when you submit Form 3508EZ – the actual loan forgiveness application. Be prepared! You can download these instructions directly from the SBA.gov website: SBA Loan Forgiveness Instructions

PPP Loan Forgiveness Rules

It’s important to understand the instructions and fill out the PPP loan forgiveness application. While the current form will need to be updated based on the Paycheck Protection Program Flexibility Act, this application needs to be submitted to the PPP lender you are working with.

For additional background, per the SBA website, the loan forgiveness form includes instructions and guidance to help you understand the process, including:

• Options to help you calculate payroll costs
• Flexibility to include eligible payroll and non-payroll expenses paid or incurred during the covered period
• Step-by-step instructions for how to perform the calculations required by the CARES Act
• Implementation of statutory exemptions from loan forgiveness reduction (based on rehiring by the deadline)
• Exemption from the loan forgiveness reduction for cases where you made a good-faith, written offer to rehire worker(s) that was declined

Please check the SBA website frequently for an updated version and to download the instructions and application form.

Paycheck Protection Program loans

Under the stimulus package, the PPP is available to small and medium businesses with less than 500 employees via the U.S. Small Business Administration (SBA). The SBA has been administering the Paycheck Protection Program loan for businesses to help maintain their staff and payroll and cover related costs during the Coronavirus pandemic.

The program provides cash-flow assistance through 100 percent federally guaranteed loans to employers who maintain their payroll during this emergency. The loans will be forgiven for employers who maintain their payroll and help workers keep their jobs. This in turn will help affected small businesses and our economy snap-back faster as we move through this crisis.

The Paycheck Protection Program has a host of attractive features, such as forgiveness of payroll expenses based on employee retention and salary levels, no SBA fees, and at least six months of deferral (with maximum deferrals of up to a year).

Thousands of banks already participate in the SBA’s lending programs, including numerous community banks. You do not have to visit any government institution to apply for the program.

Find an SBA-approved lender near you: PPP Lenders

For more information, visit the SBA.gov website. The SBA also has a hotline to help answer questions 1-800-659-2955, 7 days a week from 7:00a.m. to 9:00p.m.

Disclaimer:

As of publish date, while the information provided in this article is intended to be accurate, it should not be considered legal advice. These programs are rapidly evolving and we cannot be held responsible for any errors or omissions. Please contact your local bank, SBA and U.S. Treasury websites for updated information. You should also consult with your tax, legal or financial advisor to make the right choice for your business.