SBA and Treasury Announce New 3508EZ and Revised Full Forgiveness Applications for the Paycheck Protection Program (PPP), plus EIDL Loan Update

June 17th - The SBA, in consultation with the Department of the Treasury, posted a revised, borrower-friendly Paycheck Protection Program (PPP) loan forgiveness application implementing the PPP Flexibility Act of 2020, signed into law on June 5, 2020. 

In addition to revising the full forgiveness application, SBA also published a new 3508EZ version of the forgiveness application that applies to borrowers that:

• 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%.

**(*Reducing pay would mean cutting a pay rate, not necessarily simply earning less because of reduced hours)**

The EZ application requires fewer calculations and less documentation for eligible borrowers. Details regarding the applicability of these provisions are available in the instructions to the new EZ application form. 

While this form is far easier to complete, you will still need to document and retain good records related to this loan!  You will be required to make several representations and certifications to the accuracy of the information provided.

Both applications give borrowers the option of using the original 8-week covered period (if their loan was made before June 5, 2020) or an extended 24-week covered period. These changes will result in a more efficient process and make it easier for businesses to realize full forgiveness of their PPP loan. 

Click below to view the EZ Forgiveness Application.

Click below to view the Full Forgiveness Application.

Some businesses are now past the initial 8-week period and can apply NOW for forgiveness. If you are not 100% certain that 100% of your loan will be forgiven, perhaps wait. There is no harm in doing so as this loan does not have interest associated with it until an agreement on the amount forgiven. Remember, you now have 24 weeks and non-payroll cost can be as much as 40% of the loan. 

For self-employed borrowers (Schedule C) and/or those who don’t have employees (Single-member LLCs).  The recently passed PPP Flexibility Act has been clarified and now essentially ensures full forgiveness for those who took the maximum loan amount based on 2.5 times their 2019 monthly income.

Still haven't applied for PPP yet?  Given the very flexible terms, you should consider this.  You have until June 30 to apply for PPP funding.  There are more than 140 billion still left. Some banks are not accepting. If yours is not, try Paypal Bank. They are turning things around quite quickly. https://www.loanbuilder.com/ppp-loan-support

Economic Injury Disaster Loan (EIDL) grant and loan program update

For the last month or so, the EIDL program was not available as it was limited to Agriculture. On June 15th, the SBA opened the program up to all businesses again.

Many have already received the notice of approval. It comes from [email protected] so check your junk folders if you applied and have yet to receive. You have 60 days to accept. 

Again, these are actual loans that carry interest and now limited to $150,000. Take only if necessary. Consider an insurance policy to protect against future work stoppage. There is no prepayment penalty so if deemed unnecessary, pay it back before December 31.

These loans do have rules for what they can and more importantly, cannot be used for. They can but should not, be used for any PPP eligible expenses until you are certain your PPP expenses will be high enough to cover 100% of PPP loan. 

It has been made very clear what they cannot be used for. This list includes but is not limited to the following:

• Dividends and bonuses 
• Disbursements to owners, unless for the performance of services. Think 35%-40% of production.
• Repayment of stockholder/principal loans
• Expansion of facilities or acquisition of fixed assets although there is belief exceptions would be made to acquire the equipment necessary to open safely.
• Repair or replacement of physical damages 
• Refinancing long-term debt
• Relocation (however, you can request written consent to relocate)

Since loans over $25,000 will require collateral and the submission of financial statements and/or tax returns every year the loan is outstanding, take this if needed, but be careful how you use it.  If deemed that you wrongly applied for or used the loan, you may be subject to civil and/or criminal penalties. 

Like previous changes to the PPP, borrowers should expect more guidance from the SBA and Treasury Department in the form of FAQ’s. 

Keep in mind, it is still vitally important to remain buttoned up and track eligible expenses and keep receipts, and I help my HR and Finance clients keep track of their PPP loan spending through a dashboard within Paycor’s HRIS/Payroll software that gives a breakdown of payroll expenses by date, including earnings, deductions and taxes. Importantly, the dashboard removes any non-forgivable payroll costs. PPP Dashboard. 

For more information about PPP, or if you have questions, please reach out me to anytime with some questions or your availability and we can coordinate. Email me or via LinkedIn.

Brendan Nicholls, SHRM-SCP

President of HRA of Greater Oak Brook SHRM

Communications Director, ILSHRM

New Client Consultant, Paycor

630.746.5707

[email protected]