SBA and Department of Treasury Release Updated PPP Loan and EZ Loan Applications
On June 16, 2020, the U.S. Small Business Administration (“SBA”) in consultation with the Department of the Treasury published a revised, borrower-friendly Paycheck Protection Program Loan Forgiveness Application (“Long Form Application”), implementing the Paycheck Protection Program Flexibility Act of 2020, enacted on June 5, 2020. The revised Long Form Application is shorter than the original full form. The SBA also released a new Paycheck Protection Program Loan Forgiveness Application Form 3508EZ (“EZ Application”), which is a shorter, streamlined application in comparison to the Long Form Application.
Borrowers are eligible to apply under the EZ Application if they meet any of the requirements below:
- Borrower is self-employed, an independent contractor or sole proprietor and has no employees when the application is filed.
- Borrower did not reduce the salaries or wages of any employee by more than 25% during the covered period or alternative payroll covered period compared to the period between January 1, 2020 and March 31, 2020, and did not reduce the number or hours of their employees between January 1, 2020 and the end of the covered period. For the purposes of considering the reduction of employees or hours, the EZ Application provides that the applicant should ignore reductions of the number or hours of employees that arose from an inability to rehire individuals who were employees on February 15, 2020 if the borrower was unable to hire similarly qualified employees for unfilled positions on or before December 31, 2020. The applicant should also ignore reductions in an employee’s hours that the borrower offered to restore and the employee refused.
- Borrower was unable to operate during the covered period at the same level of business compared to pre-February 15, 2020, as a result of complying with federally mandated health directives and guidelines for COVID-19 related work and customer safety requirements issued between March 1, 2020 and December 31, 2020, and did not reduce the salaries or wages of their employees by more than 25%.
For the purposes of these eligibility requirements, “employees” means only those employees that did not receive, during any single period in 2019, wages or salary at an annualized rate of pay in an amount more than $100,000.
Both applications give borrowers the option of using the original eight-week covered period (if their loan was made before June 5, 2020) or an extended 24-week covered period. The SBA believes these changes will result in a more efficient process and make it easier for businesses to realize full forgiveness of their PPP loan.
The “covered period” is either: (1) the 24-week (168-day) period beginning on the PPP loan disbursement date, or (2) if the borrower received its PPP loan before June 5, 2020, the borrower may elect to use an eight-week (56-day) covered period. In no event may the covered period extend beyond December 31, 2020.
The EZ Application requires the applicant-borrower to certify that it qualifies for the applicable safe harbors, that is, no reduction in salary/wages, no or permitted reduction in staff, inability to operate at the same level of business. The borrower must provide documentation evidencing same, which is different from the Long Form Application, which requires that the borrower prepares multiple sets of tables and complex calculations. This documentation includes payroll records that separately list each employee and show the amounts paid to each employee during the period between January 1, 2020 and March 31, 2020, and the amounts paid to each employee during the covered period or alternative payroll covered period.
If a certification is made as to the inability to operate at the same level of business due to compliance with federal agency mandated safety guidance and requirements, the borrower is to provide copies of applicable requirements for each of borrower’s locations and relevant financial records evidencing the borrower’s inability to operate at pre-February 15, 2020 levels during the period between March 1, 2020 and December 31, 2020.
If applicable, a borrower may also provide documentation regarding any employee job offers and refusals, refusals to accept restoration of reductions in hours, firings for cause, voluntary resignations, written requests by any employee for reductions in work schedule, and any inability to hire similarly qualified employees for unfilled positions on or before December 31, 2020.
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06.19.2020 | PUBLICATION: Other Publications |