June 24th: Could This Be The Final PPP Forgiveness Update?
As its new normal, the SBA released last Friday afternoon (June 19th) what could possibly be the final updated guidance to the Paycheck Protection Program (PPP) loan forgiveness process. Could this be the FINAL PPP loan forgiveness update? Perhaps, but that’s up to Congress and the SBA. We shall simply interpret the language as best we can and make sure anyone with a PPP loan understands how best to get the maximum amount forgiven.
To that end, we have updated both our PPP Loan Forgiveness Calculator and our PPP Loan Forgiveness Guide. Both are free, and you can download them by clicking the button below.
What’s New in PPP?
The biggest change is that there are now TWO PPP Loan Forgiveness Applications. The standard application, SBA Form 3508, and the new short form SBA Form 3508EZ. It is appropriate that the SBA has named the new short form “EZ”, since we and others have compared the standard form 3508 to a business tax return for its complexity.
Only certain PPP borrowers are eligible to use Form 3508EZ. Those borrowers need to meet ONE of these criteria, from yesterday’s SBA press release:
Are self-employed and have no employees; OR
Did not reduce the salaries or wages of their employees by more than 25%, and did not reduce the number or hours of their employees; OR
Experienced reductions in business activity as a result of health directives related to COVID-19, and did not reduce the salaries or wages of their employees by more than 25%.
Are you eligible? The simple way to make that determination is by starting on page 1 of the instructions to the Form 3508EZ. Page 1 has a simple checklist with three checkboxes. If you can check one of those boxes, you can use Form EZ.
Other Changes to PPP Forgiveness
The Paycheck Protection Flexibility Act of 2020 (PPFA) was signed in early June, and allows for the following changes to PPP forgiveness.
The term of PPP loans made after June 5th, 2020 was extended to five years.
The ratio of payroll to non-payroll costs eligible for forgiveness changed from 75%/25% to 60%/40%.
The forgiveness period changed from 8 weeks to 24 weeks with an option to continue using an eight-week period.
The new application instructions added new limits on compensation and other eligible payroll costs for owners.
The SBA also issued a new interim final rule this week with guidance on calculating loan forgiveness related to employee and owner compensation during the new 24-week covered period described in the PPFA.
What’s Next for Small Businesses and PPP?
Believe it or not, there is still PPP loan money available. Small businesses impacted by COVID-19 can still apply for and get a PPP loan.
While this latest change could be the final change to PPP forgiveness, we expect the SBA to continue updating its guidance for PPP loan forgiveness as more and more businesses begin the forgiveness application process and more questions arise.
If your business received a PPP loan, you should download the SBA forgiveness application or Form 3508EZ, whichever is appropriate, and begin to prepare for your actual forgiveness application.
If you are like most people, you will need help from your accountant. We encourage you to invite your accountant to join our network and help you complete and submit your PPP forgiveness application through your bank via our portal. Invite your accountant here or find a virtual accountant here.