New PPP Loan Forgiveness Applications and Additional Guidance Released Pursuant to the Protection Program Flexibility Act

Reminder – Payroll Protection Program Funds Are Still Available!

If the current economic uncertainty is affecting your business, there is good news, funds are still available under the Paycheck Protection Program. However, borrowers need to act quickly because the deadline to receive a loan number from the SBA is June 30, 2020, and the lender will need time to process the application.

 

The SBA has created a new EZ loan forgiveness application. Here are the eligibility requirements:

You may use the EZ application if you can certify at least one of the following:

  • I was a self-employed individual or independent contractor with no employees at the time of the application.
  • The company did not reduce annual salaries or hourly wages by more than 25% and did not reduce the number of employees or average paid hours paid between January 1 and the end of the covered period.
  • Did not reduce annual salaries or hourly wages by more than 25% and was unable to operate at the same level of business as before February 15, 2020 due to compliance with governmental requirements issued between March 1, 2020 and December 31, 2020 related to COVID-19.

If you certify that you are eligible for the EZ application, you only report your payroll and non-payroll covered costs.

View the new EZ Forgiveness Application.
View the revised Long Form Forgiveness Application.

 

There is an option for an 8-week covered period (for loans made before June 5 th ) or a 24-week covered period. Does the alternative covered period still apply?

Previous guidance that allowed for the 24-week covered period did not mention the alternative coverage period. The new applications do allow for the optional alternative covered period. The alternative covered period begins on the first day of the next payroll cycle after the funding date.

 

The annualized cap on salaries of more than $100,000 is increased with the 24-week coverage period, but the calculation is different for owners.

The covered period for all loans is 24 weeks beginning from the date your PPP loan is funded. If your loan was made before June 5, 2020, you may elect to have your loan forgiveness covered period be the eight weeks beginning on the loan funding date.

 

The new guidance corrects the 60% payroll cost use it or lose it clause.

As expected, the cap on compensation for employees that make over $100,000 has been increased to $46,154. Below are the annualized salary cap calculations for the two different covered periods:

24-week covered period cap: 24 ÷ 52 × 100,000 = $46,154
8-week coverage period cap: 8 ÷ 52 × 100,000 = $15,385

To mirror the original loan application, the covered period cap calculation is different for self-employed individuals, independent contractors, and owner-employees. See the updated annualized calculation below which applies to both covered periods:

Owner’s covered period cap: 2.5 ÷ 12 × 100,000 = 20,833.


 

PPP Loan Forgiveness Documentation Checklist