Paycheck Protection Program – SBA Updates to Loan Forgiveness Application
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On June 16, 2020, the SBA released an updated loan forgiveness application which borrowers must submit to apply for forgiveness of a Paycheck Protection Program (PPP) loan.
06.19.20
The updated application reflects changes to the PPP program mandated by the recent Flexibility Act signed into law on June 5, 2020. Additionally, the SBA released a streamlined “Loan Forgiveness Application Form EZ” to simplify the application process for certain borrowers.
Who is eligible for the EZ Application?
PPP borrowers may apply for loan forgiveness with the EZ Application if they qualify under one of three categories. Borrowers who use the EZ Application must be (i) an individual who is self-employed and has no employees, (ii) a business which did not reduce the salaries or wages of its employees by more than 25% and did not reduce the number or hours of its employees or (iii) a business which experienced reductions in business activity as a result of health directives related to COVID-19 and did not reduce the salaries or wages of its employees by more than 25%.
What are the differences between the two applications?
While the EZ Application is substantially similar to the updated long form application, the long form version includes additional calculations to adjust for Full-Time Equivalency (FTE) and salary/wage reductions. The long form version also includes Schedule A and the Schedule A Worksheet with supplemental commentary regarding the calculations in the forgiveness application. Additionally, the EZ Application contains certifications with respect to the borrower’s qualifications for the streamlined document.
How does the updated application differ from the original version released in May?
The original forgiveness application was updated to reflect changes to the PPP loan program pursuant to the Flexibility Act, which modified several of the SBA’s original regulations relating to loan forgiveness. While borrowers were originally eligible for forgiveness for costs incurred during an eight week “Covered Period”, the Covered Period now extends to 24 weeks past the borrower’s loan disbursement date. The new application also reflects the extension of the safe harbor time period during which a business may restore any workforce or wage reductions to December 31, 2020 or 24 weeks past loan disbursement. Finally, the application shifts the allocation of forgivable expenses so that non-payroll costs may constitute up to 40% of forgivable expenses. Prior to the Flexibility Act, the SBA had mandated that non-payroll costs would be capped at 25% of forgivable costs.
The new forgiveness applications may be accessed at the following links:
The SBA Focus Group of the COVID-19 Task Force at Klehr Harrison stands ready to assist you in your business and legal needs. We will continue to provide additional information and guidance as the PPP loan program is implemented.
Author Elizabeth Bucilla is an associate in the Corporate & Securities Department at Klehr Harrison.