New PPP Loan Forgiveness Applications Released
June 18, 2020

The SBA released a revised loan forgiveness application for the Paycheck Protection Program (PPP). They also unveiled a new EZ application for forgiveness of PPP loans. The new applications reflect changes to the PPP made by the Paycheck Protection Flexibility Act.

PPP Loan Forgiveness Application (revised 6-16-20)

EZ PPP Loan Forgiveness Application

The new EZ PPP Loan Forgiveness Application requires fewer calculations and less documentation than the full application.

It can be used for borrowers that:

  • Are self-employed and have no employees;
  • 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 didn’t reduce the salaries and wages of their employees by more than 25%.

Interim Final Rule

The SBA also issued a new Interim Final Rule (IFR) providing guidance on how to calculate employee and owner compensation for loan forgiveness in a new 24-week period created under the Paycheck Protection Flexibility Act.

The PPP allows for loan forgiveness for payroll costs–including salary, wages, and tips — for up to $100,000 annualized per employee, or $15,385 per individual over the eight-week period. The new interim final rule establishes the 24-week maximum for full loan forgiveness at $46,154 per individual.

  • The minimum term for PPP 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.
  • The proportion of PPP funding that must be used on payroll costs to qualify for full forgiveness drops to 60% from 75%.
  • The application deadline for PPP loans remains June 30.
Owner Compensation Replacement Calculations

While the employee compensation limit for the 24-week period is three times the eight-week limit, the interim final rule does not do the same with the owner compensation replacement for businesses that file Schedule C, Profit or Loss From Business, or Schedule F, Profit or Loss From Farming, tax returns. For those businesses, forgiveness for the owner compensation replacement is calculated for the eight-week period as 8 ÷ 52 × 2019 net profit, up to a maximum of $15,385. For the 24-week period, the forgiveness calculation is limited to 2.5 months’ worth (2.5 ÷ 12) of 2019 net profit, up to $20,833.

Highlights of the 6-22-20 Interim Final Rule (IFR)

The new interim final rule makes revisions to previous guidance to reflect the Paycheck Protection Program Flexibility Act of 2020.

New material in this IFR is the explanation of the process for applying for early forgiveness. PPP recipients can apply for loan forgiveness early, but that doing so could cost them money.

Early loan forgiveness applications

Many small businesses have inquired about whether they can apply for PPP loan forgiveness before their covered period expires. The new interim final rule says that if a borrower applies for loan forgiveness before the end of the covered period and has reduced any employees’ salaries or wages by more than the 25% allowed for full forgiveness, the borrower must account for the excess salary reduction for the full eight-week or 24-week covered period, whichever one applies to its loan.

Under that guidance, PPP borrowers that apply early for loan forgiveness forfeit a safe-harbor provision allowing them to restore salaries or wages by Dec. 31 and avoid reductions in the loan forgiveness they receive. For example, if a borrower has a 24-week period that ends in November but wants to apply in September, any wage reduction in excess of 25% as of September would be calculated for the entire 24-week period even if the borrower restores salaries by Dec. 31.

Paycheck Protection Flexibility Act Highlights

  • Expansion of the covered period for loan forgiveness to 24 weeks from 8 weeks
  • Reduction of the proportion of proceeds that must be spent on payroll costs to 60% from 75%
  • Established a safe harbor for businesses that have been unable to return to the level of business activity they had before the COVID-19 pandemic due to compliance with health and safety guidelines for slowing the spread of the virus

Revised PPP Loan Forgiveness Application Highlights

  • Health insurance costs for S corporation owners cannot be included when calculating payroll costs
  • Retirement costs for S corporation owners are eligible costs
  • 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 of the loan forgiveness application is submitted. Borrowers don’t have to wait until December 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

Questions or need assistance on the new forgiveness applications? Contact one of our experts at (888) 388-1040.

This information was last updated on 6-18-20 at 2 pm.

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