SBA Releases Updated PPP Forgiveness Application

On June 17th the SBA announces a revised application and a new EZ application for loan forgiveness. For the full application click here. For the EZ application click here.


Key updates / changes to the new application are as follows:


1. Borrowers can complete an E-Z Form if they meet one of the following:

        • Self-employed with no employees

  •         • Did not reduce wages/hourly rate for any employee by more than 25% during the covered           period compared to the 1st quarter 2020 AND did not reduce the number of employee or           number of hours for employees between Jan 1, 2020 and the end of the covered period           (ignoring reductions for efforts to re-hire someone back     and they declined or were           unable to hire similarly qualified employees for unfilled positions on or before 12-31-20)
  •         • Did not reduce wages/hourly rate for any employee by more than 25% during the covered           period compared to 1st quarter 2020 AND borrower was unable to operate during the           covered period at the same level of business activity as before 2-15-20 because of           compliance with requirements of Health & Human Services,CDC or OSHA.

2. The FTE & Wage Reduction Safe Harbors – if the average FTE (for FTE safe harbor calculation) or the average wages (for wage reduction safe harbor calculation) between 2/15/20 – 4/26/20 are MORE than the FTE or Wages at 2-15-20, safe harbor to restore FTEs/wages does NOT apply. 

3.   The safe harbor for FTE/wages can be met the EARLIER of 12/31 or the date they apply for forgiveness.  So, if businesses meet the FTE requirements earlier than 12/31, they do not have to wait until 12/31 to apply.  They do, however, have to wait until after the covered period (either 8 or 24 weeks) to apply.


4.   It appears that if the 24 week period is used for forgivable costs, the cost will far exceed the loan amount, which means that even if the business had an FTE or wage reduction, the entire loan amount can still be forgiven. For example, costs over the 24 weeks may be twice as much as the loan amount, so even if the business reduced FTEs by 50%, the entire loan amount can still be forgiven.


5.   Owners are limited to 2.5 months of payroll if using the 24 week period (which is $20,833 over the 24 weeks) – 2.5/12 * $100,000.   


6.   Self-employed people (Schedule C’s) get 2.5 months of their Schedule C profit,which is what the loan was based off. So, if there were no other employees, the entire loan amount will be automatically forgiven.


7.   Businesses cannot separately include health insurance paid for owners in addition to their compensation.


8.   Businesses can include 401k contributions for S-Corp owners in addition to owner’s compensation (but not for partners in a partnership).


Frequently Asked Questions: Awaiting SBA Guidance

For payroll paid during the covered period is it based on the date paid or is it based on when the payroll was incurred? Is there a limit on how much an employee can make compared to the most recent quarter if it is not in excess of $100,000 on an annual basis? Is rent, utilities, interest, etc. in arrears eligible for forgiveness if paid during the covered period? What about amounts paid in advance? For employees laid off prior to 4/27 and hired back by 6/30 is there a time period they must remain employed in order to avoid a reduction in loan forgiveness? How do you define FTE? Is it 30, 35 or 40 hours? We know non-mortgage interest is a covered cost, but is it also eligible for forgiveness? How do you measure the 25% reduction amount for payroll? For example, from 1/1/20 to 3/31/20, do you look at number of hours, rate per hour, or just total compensation during that period? If you bonused people during Q1 of 2020 that is not a part of their normal compensation, is that included when looking at the 25% reduction for payroll? What is “transportation” with regards to being a utility? Does this include mileage, gas for vehicles, etc.? Does “rent” include all leases (building, vehicle, equipment, copiers)? If not, what does it include? If a business hires new employees after 2/15/20, can they be included in the FTE count for the 8-week period? Are there any restrictions on compensation (increases) for related parties (mother, father, brother, sister, child, etc.)?


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