SBA Revises the Paycheck Protection Program Loan Forgiveness Application
June 17, 2020
On June 16, 2020, the U.S. Small Business Administration (SBA) released the updated Paycheck Protection Program (PPP) Loan Forgiveness Application which supersedes the application previously released on May 15, 2020.
The new application incorporates changes to the PPP per the Paycheck Protection Program Flexibility Act (H. R. 7010), which was signed into law on June 5, 2020. Read Aprio’s summary of those changes here.
The latest PPP loan forgiveness application, in conjunction with the June 17, 2020 release of the Revisions to the Third and Sixth Interim Final Rules, addresses some of the previously unanswered questions, including:
- Covered Period: All PPP loan borrowers will now have a 24-week Covered Period, unless borrowers of loans originated prior to June 5, 2020 elect to use the 8-week Covered Period as originally designed. The application instructs the borrower to state their covered period on the application, either the 8- or 24-week period. These new instructions do not suggest that there is an additional form required for the 8-week election.
- Maximum Cash Compensation Per Employee: PPP loan borrowers can obtain forgiveness for cash compensation in the maximum amount of $46,154 per employee, calculated as $100,000 as prorated over the 24-week Covered Period, or $15,385 over the 8-week Covered Period.
- Owner Compensation: Prior to this latest guidance, owner compensation was limited to eight weeks’ worth (8/52) of 2019 net profit up to $15,385. PPP loan borrowers using the 24-week Covered Period can now include 2.5 months’ worth (2.5/12) of 2019 net profit up to $20,833.
The SBA also released the PPP Loan Forgiveness Application Form 3508EZ (Form EZ) on June 16, 2020. The Form EZ is a simplified version of the loan forgiveness application and is applicable to PPP loan borrowers who are willing to certify they have met one of the following conditions:
- Borrower Has No Employees: The borrower is a self-employed individual, independent contractor, or sole proprietor who had 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 PPP loan application form.
- No Salary or Hourly Wages Reductions or FTE Reductions: The borrower did not reduce annual salary or hourly wages of any employee by more than 25 percent during the Covered Period or compared to the period between January 1, 2020 and March 31, 2020, AND did not reduce the number of employees or the average paid hours of employees between January 1, 2020 and the end of the Covered Period.
- No Salary or Hourly Wages Reductions or Unable to Maintain Level of Business Activities: The borrower did not reduce annual salary or hourly wages of any employee by more than 25 percent during the Covered Period or compared to the period between January 1, 2020 and March 31, 2020, 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, the Occupational Safety and Health Administration, or standards of sanitation, social distancing, and any other work or customer safety requirement related to COVID-19.
Let Aprio Help
Aprio has established a dedicated PPP loan forgiveness team that is continuously monitoring new guidance from the SBA, as well as the Treasury, Congress and the IRS, to ensure we have the latest information when advising our clients.
To discuss how to interpret these new requirements, accurately complete your forgiveness application and maximize PPP loan forgiveness, contact Aprio’s dedicated PPP loan forgiveness team for a consultation.
Disclaimer for services provided relative to SBA programs and the CARES Act
Aprio’s goal is to provide the most up to date information, along with our insights and current understanding of these programs and regulations to help you navigate your business response to COVID-19.
The rules regarding SBA programs are constantly being refined and clarified by the SBA and other agencies In certain instances, the guidance being provided by the agencies and/or the financial institutions is in direct conflict with other competing guidance, regulations and/or existing laws.
Due to the evolving nature of the situation and the lack of final published rules, Aprio cannot guarantee that additional changes or updates won’t be needed or forthcoming and the original advice given by Aprio may be affected by the evolving nature of the situation.
You need to evaluate and draw your own conclusions and determine your Company’s best approach relative to participation within these programs based on your Company’s specific circumstances, cash flow forecast and business strategy.
In situations where resources are provided by third parties, those services should be covered under a separate agreement directly with that service provider. Aprio is not responsible for the actions of any other third party.
Aprio encourages you to contact your legal counsel to address the legal implications of the impact of the CARES Act and specifically your participation in any of the SBA programs.
About the Author
Justin Elanjian, CPA, is the Partner-in-Charge of Aprio’s Paycheck Protection Program (PPP) & Employee Retention Credit (ERC) Services. As a national PPP expert, prominent speaker and strategic business advisor, Justin helps both lenders and borrowers navigate the complexities of the PPP. He also helps his clients realize benefits from other stimulus package programs, such as the ERC, and is committed to strengthening his clients’ balance sheets and helping them achieve what’s next. Justin also leads a team of more than 50 professionals who share his passion for helping businesses maximize the federal COVID relief programs.