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Revised Loan Forgiveness Application & Guidance

Last week, the SBA released a revised PPP loan forgiveness application and a new EZ application as well as provided further guidance on employee and owner compensation calculations in the PPP Flexibility Act. 

Both applications allow borrowers who were assigned a loan number by the SBA on or before June 5th to choose between an 8-week or 24-week expenditure time frame to qualify for loan forgiveness. Those assigned a loan number after June 5th must use a 24-week period.

EZ PPP Loan Forgiveness Application

The new EZ application requires less documentation and fewer calculations for eligible borrowers than the full application form.
Borrowers eligible to use the EZ application must be one of the following:
  • self-employed or have no employees
  • did not reduce their employees’ salaries or wages by more than 25%
    and did not reduce the number or hours of their employees
  • experienced reductions in business activity as a result of health directives related to COVID-19 and employees’ salaries or wages were not reduced by more than 25%.
Click here to view the new EZ application instructions and form.

Full Loan Forgiveness Application

The regular PPP Loan Forgiveness Application, revised June 16, 2020, is five pages long. The revision reflects the new 24-week covered period, as well as some other clarifications to the rules.
Click here for this newly revised full loan forgiveness application.

PPP Flexibility Act – SBA’s newest Interim Final Rule (IFR) Guidance

The SBA’s 19th IFR guidance published on Friday, June 19, 2020, provided additional insight on how borrowers can calculate compensation and non-payroll costs to qualify for loan forgiveness based on information submitted in their loan application.

Last week’s ruling provides this guidance:

Owner Compensation Calculation, including owner-employees, self-employed individuals and general partners:

8 weeks’ worth of 2019 net profit (up to $15,385) for an eight-week covered time frame
OR
2.5 months’ worth of 2019 net profit (up to $20,833) for a 24-week covered time frame.


The reason this cap is not based on 24 weeks is that the PPP loan amount was based on 2.5 months’ worth of payroll costs so that a shorter time period was used.

The above calculation does not include any FFCRA claimed qualified sick leave.

For Schedule C or F filers (self-employed individuals and farmers) with no employees, using the above 24-week period effectively guarantees they will receive full loan forgiveness.

Employee Compensation and Non-payroll Expenses:

Both employee compensation and non-payroll expenses are extended to 24 weeks, allowing higher loan forgiveness amounts.

While payroll costs remain capped at $100,000 per individual employee’s annualized pay, the extension allows for $46,154 in forgiveness for the 24-week period compared to $15,385 for an 8-week period. Again, as noted above, this 24-week cap is limited to 2.5 months’ worth for owner compensation.

Eligible non-payroll expense categories remain the same as before and continue to include those incurred or paid within the 24-week covered time frame.
 
As of June 20th, there was still $128 billion available in PPP loan funding. PPP loan applications are still being accepted until June 30, 2020.  To read our June 11, 2020, JPS article on the PPP Flexibility Act itself, click here.
As always, stay updated with JPS as we continue to monitor guidance and provide additional information as it becomes available.

To read other JPS COVID-related articles, click here.
Do you and your business need help to navigate these changing times? Contact JPS.
www.jpspa.com

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