PPP Flexibility Act and Revised Forgiveness Application

On June 17, 2020 the U.S. Small Business Administration (SBA), released a revised Paycheck Protection Program (PPP) loan forgiveness application implementing the PPP Flexibility Act, as well as an EZ version.  The EZ version applies to the following borrowers:

• Self-employed, independent contractor, or sole proprietor who had no employees at the time of the application
• Those who did not reduce annual salaries or hourly wages for any employees by more than 25% during the covered period compared to the period between 1/1/20 and 3/31/20 AND they did not reduce the number of employees or average paid hours of employees between 1/1/20 and the end of the covered period.
• Those who did not reduce annual salaries or hourly wages for any employees by more than 25% during the covered period compared to the period between 1/1/20 and 3/31/20 AND who were unable to operate during the covered period at the same level of business activity as before 2/15/20 due to compliance with requirements established or guidance issued between 3/1/20 and 12/31/20 by Secretary of Health and Human Services, the Director of the Centers for Disease Control and Prevention, or the Occupational Safety and Health Administration, related to the maintenance of standards of sanitation, social distancing, or any other work or customer safety requirement related to COVID-19.

Additional guidance issued have clarified the following:

• A borrower can only opt into the 8 week period if they received the loan prior to June 5^th.  If funds were disbursed on or after June 5^th, they are automatically using the 24 week covered period.
• The repayment terms have changed to 5 years automatically for anyone that received the loan on or after June 5^th.  If they received the loan prior to June 5^th, they will need to work with their lender to get the repayment terms extended and the lender MAY deny this request.
• Borrowers that are not able to use at least 60% of funds on eligible payroll costs can obtain partial forgiveness.  This clarifies the confusion that a borrower with less than 60% in payroll costs was ineligible for any forgiveness.
• With the new 24 week covered period – for owner compensation replacement that was based on 2019 net profits, an owner can now compensate themselves up to 2.5/12 times worth of their 2019 net profit up to a maximum of $20,833.

With the release of the revised forgiveness application, more Treasury FAQs and Interim Final Rule Revisions are expected over the next few days.  

We held Q&A Webinars on this topic and the recordings are available on our website at the links below.