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.
Download Guide & Calculator

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.
With a huge percentage of the 30,000,000 US-based small businesses expected to apply for the PPP, execution is critical. It happened. A new, particularly strong virus quickly bloomed into a global pandemic. While the Federal Government's response was timely and well-funded, a lot of loose ends were left with regards to execution, specifically regarding the technology needed to execute. Businesses were encouraged to apply for the SBA Payroll Protection Program (PPP) starting last week. More importantly, they were encouraged to apply for the loan through their existing banking relationship.

Unprecedented Demand

A loan that becomes a grant and allows a business to cover payroll while shut down? Who wouldn't apply? The SBA estimates there are roughly 30,000,000 small businesses in the United States. According to the Independent Community Bankers of America's President & CEO, Rebecca Romero Rainey, "Community banks make 60 percent of small business loans." While estimates of the SBA's total loan volume processed annually prior to the crisis rest around $20 billion annually, the PPP program authorizes $349 billion, and that money is to be deployed immediately.

Inadequate Tools

While no one doubts the program is well-intended, community bankers are in an awkward position. They have been positioned by government and the press as the saviors of small business (through their access to these funds). However, their ability to help is severely hampered using their current tools. Romero continues: "Community bankers have always been there to meet their customers' needs, and to be faced with a situation like they experienced today--in which they were unable to access the SBA programs promised to America's small businesses due to failed technology links and portals--has been beyond stressful and disappointing." While a new portal has been promised, it has not been delivered. Banks with access to E-Tran have reported "significant challenges with user access and latency in application processing."

A Looming Threat

While community bankers continue to pressure their contacts at the SBA and Department of Treasury for solutions, rumors are swirling that two of the stronger Fintechs, PayPal and Square, may be granted special privileges to provide electronic loan applications for the PPP. With significant user bases on both the consumer and business sides of the market, Square and PayPal both stand to become even more disruptive to community banks.

A Generational Opportunity

While there are certainly problems to solve, there is also an enormous opportunity to provide assistance to small businesses in their darkest hour. Not only will community banks that successfully deliver PPP funds to their clients attain hero-status indefinitely, they also stand to make significant gains for their shareholders as $349 billion in loans are rapidly deployed to the market. Banks that want to address this crisis head-on should look to Fintech as well, but choose a partner that works collaboratively with financial institutions, always looking to provide additional capabilities while keeping the bank at the center of the business client relationship. FINSYNC is that partner. FINSYNC's electronic loan application is plug and play. Additionally, the application feeds into the bank's connected Lender's Portal, a cloud tool for processing and underwriting loan applications. The best part...a bank can deploy FINSYNC's solution in 24 hours, with no IT integration required. Is your bank ready to start helping businesses in need? Join the FINSYNC Network today.
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