PPP Loan Forgiveness Application For Loan Forgiveness
PPP Loan Forgiveness Application For Loan Forgiveness
The Paycheck Protection Program Flexibility Act of 2020 (“PPF”), augmenting the Paycheck Protection Program Coronavirus Aid, Relief and Economic Security (CARES) Act (“PPP”) provides businesses more time and flexibility on the PPP loan repayment terms. The U.S. Treasury, through the Small Business Administration (“SBA”) issued rules and guidance, and a loan forgiveness application to implement these legislative amendments to the PPP. These modifications will implement the following important changes:
- Extend the covered period for loan forgiveness from eight weeks after the date of loan disbursement to 24 weeks after the date of loan disbursement, providing substantially greater flexibility for borrowers to qualify for loan forgiveness. Borrowers who have already received PPP loans retain the option to use an eight-week covered period.
- Lower the requirements that 75 percent of a borrower’s loan proceeds must be used for payroll costs and that 75 percent of the loan forgiveness amount must have been spent on payroll costs during the 24-week loan forgiveness covered period to 60 percent for each of these requirements. If a borrower uses less than 60 percent of the loan amount for payroll costs during the forgiveness covered period, the borrower will continue to be eligible for partial loan forgiveness, subject to at least 60 percent of the loan forgiveness amount having been used for payroll costs.
- Provide a safe harbor from reductions in loan forgiveness based on reductions in full-time equivalent employees for borrowers that are unable to return to the same level of business activity the business was operating at before February 15, 2020, due to compliance with requirements or guidance issued between March 1, 2020 and December 31, 2020 by the Secretary of Health and Human Services, the Director of the Centers for Disease Control and Prevention, or the Occupational Safety and Health Administration, related to worker or customer safety requirements related to COVID–19.
- Provide a safe harbor from reductions in loan forgiveness based on reductions in full-time equivalent employees, to provide protections for borrowers that are both unable to rehire individuals who were employees of the borrower on February 15, 2020, and unable to hire similarly qualified employees for unfilled positions by December 31, 2020.
- Increase to five years the maturity of PPP loans that are approved by SBA (based on the date SBA assigns a loan number) on or after June 5, 2020.
- Extend the deferral period for borrower payments of principal, interest, and fees on PPP loans to the date that SBA remits the borrower’s loan forgiveness amount to the lender (or, if the borrower does not apply for loan forgiveness, 10 months after the end of the borrower’s loan forgiveness covered period).
- In addition, the new rules will confirm that June 30, 2020, remains the last date on which a PPP loan application can be approved
The Treasury’s Interim Final Rule (IFR) includes a worksheet and instructions, and a new expedited (EZ) forgiveness application form and instructions that can be used by some PPP borrowers. The IFR deals with changes contained in the PPF to:
- Extend the period in which funds may be used now through December 31. However, the period for which use of funds can be forgiven is only extended from 8 weeks to 24 weeks.
- Extend the minimum loan maturity time for loans originated after the enactment of the PPF to 5 years.
- Reduce the percentage of loan proceeds that must be used for payroll costs (both generally and for forgiveness) from 75% to 60%
Here is the new EZ Loan Forgiveness Application Form. The EZ form forgiveness application can be used only by borrowers who meet at least one of these three requirements:
- The borrower did not
- reduce salary or wages of employees who had annual compensation of $100,000 or less by more than 25% during the Covered Period or the Alternative Payroll Covered Period compared to the period between January 1, 2020 and March 31, 2020 (“employees” means only those employees that did not receive, during any single period during 2019, wages or salary at an annualized rate of pay in an amount more than $100,000); and
- did not reduce employee headcount or paid hours between January 1, 2020 and the end of the Covered Period;
- The borrower is self-employed, an independent contractor, or sole proprietor with no employees at the time of the PPP loan application, and did not include any employee salaries in the computation of average monthly payroll in the Borrower Application Form;
- The borrower:
- did not reduce salary or wages of employees by more than 25% (“employees” means only those employees that did not receive during any single period during 2019, wages or salary at an annualized rate of pay in an amount more than $100,000); and
- was unable to operate during the Covered Period at the same level of business activity as before February 15, 2020, due to compliance with requirements established or guidance issued between March 1, 2020 and December 31, 2020 by the Secretary of Health and Human Services, the Director of the Centers for Disease Control and Prevention, or the Occupational Safety and Health Administration, related to the maintenance of standards of sanitation, social distancing, or any other work or customer safety requirement related to COVID.
Only borrowers fitting requirement 1 above need submit documentation regarding Full Time Employees (FTEs) (i.e., the borrower did not reduce salary or wages of employees by more than 25% and did not reduce employee headcount or paid hours). If the borrower meets requirement no. 1, the borrower must submit documents evidencing “the average number of full-time equivalent employees on payroll employed by the Borrower on January 1, 2020 and at the end of the Covered Period.” Borrowers submitting the Long Form must submit similar documentation. Borrowers using either form must submit Documentation verifying the eligible cash compensation and non-cash benefit payments from the Covered Period or the Alternative Payroll Covered Period, and documentation verifying existence of non-payroll obligations/services prior to February 15, 2020 and eligible payments from the Covered Period.
Relevant links are:
New IFR: https://home.treasury.gov/system/files/136/PPP-IFR–Revisions-to-the-Third-and-Sixth-Interim-Final-Rules.pdf
Long Form Forgiveness Application and Worksheet: https://home.treasury.gov/system/files/136/3245-0407-SBA-Form-3508-PPP-Forgiveness-Application.pdf
Long Form Forgiveness Application Instructions: https://home.treasury.gov/system/files/136/PPP-Loan-Forgiveness-Application-Instructions_1_0.pdf
EZ Form Forgiveness Application: https://home.treasury.gov/system/files/136/PPP-Forgiveness-Application-3508EZ.pdf
EZ Form Application Instructions: https://home.treasury.gov/system/files/136/PPP-Loan-Forgiveness-Application-Form-EZ-Instructions.pdf
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