SBA Part Eighteen: Modified PPP Loan Forgiveness Application, New “EZ” Loan Forgiveness Application, and New Interim Final Rule Released
*The original article published on June 18, 2020 has been updated to reflect changes as of July 20, 2020.
Between the evening of June 16, 2020, and the morning of June 17, 2020, the U.S. Small Business Administration (SBA) and U.S. Department of Treasury (Treasury) released a modified version of the Paycheck Protection Program (PPP) loan forgiveness application, introduced a new “EZ” loan forgiveness application, and released Interim Final Rule (IFR) #19 that modifies IFRs #3 and #6.
The modified loan forgiveness application addresses the revisions needed due to the Paycheck Protection Program Flexibility Act (PPPF Act), signed into law on June 5, 2020 (See SBA Part Fifteen). The revised application reflects:
- Changes to the loan forgiveness ratio – it is now 60%/40%.
- Changes to safe harbor provisions.
- Additional FTE exemptions.
- Changes associated with the new 24-week covered period.
The new “EZ” loan forgiveness application has been shortened and can be used by:
- Self-employed, independent contractors, and sole proprietor borrowers with no employees.
- Businesses that can show they spent their funds according to the guidelines of the program and didn't reduce their workforces or wages.
- Businesses that did not reduce wages and were unable to operate during the applicable covered period at the same level of business activity as such business was operating at before Feb. 15, 2020, due to compliance with requirements established or guidance issued by the Secretary of Health and Human Services, the Director of the Centers for Disease Control and Prevention, or the Occupational Safety and Health Administration during the period beginning on March 1, 2020, and ending Dec. 31, 2020, related to the maintenance of standards for sanitation, social distancing, or any other worker or customer safety requirement related to COVID-19.
IFR #19 revised two previously issued IFRs. The key takeaways from this IFR are:
- The PPPF Act states loans can have up to a 10-year maturity, but within IFR #19, the SBA has capped the loan term at five years for loans issued after June 5, 2020. Loans received before June 5, 2020, can be changed from two to five years upon mutual agreement between lender and borrower.
- IFR #19 amends IFR #3 by stating that 60% of the loan proceeds shall be used for payroll costs, instead of 75%.
- The owner-employee and self-employment compensation maximum has been modified to $20,833 for the 24-week period, the eight-week maximum remains at $15,385. Additional information regarding owner-employee and self-employment compensation rules are provided in SBA Part Fourteen.
- The payroll maximum per employee has been changed during the revised 24-week covered period option to $46,154, the eight-week maximum of $15,385 remains.
- IFR #19 confirms any forgiven PPP loan amount must have 60% of such amount attributable to eligible payroll costs.
For further information, please contact any member of Taft’s SBA Task Force.
Please visit our COVID-19 Toolkit for all of Taft’s updates on the coronavirus.
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