PPP Forgiveness Application Update

On June 16, 2020, the SBA released an updated instruction guide and application form for PPP Loan Forgiveness. These updates mirror the changes made by the PPP Flexibility Act, signed into law on June 5th.  On Monday, June 22, they also released a additional revisions to the PPP Loan Forgiveness (which already reflect most of what is included in the new Interim Final Rule), regarding the ability to apply for early forgiveness, however the ability to do so may end up

Please see the buttons below to access the instructions and application.

The most recently updated provisions allow, as noted in the Journal of Accountancy:

  • Expanding to 24 weeks, from eight weeks, the covered period during which PPP loan recipients can spend the funds and still qualify for loan forgiveness. The 24-week period applies to all loans made on or after June 5. Borrowers that received loans before June 5 can choose to elect an eight-week period.
  • The amount required to be spent on payroll costs to qualify for full forgiveness is now 60%, reduced from the former 75%.
  • Expanding the term [maturity] for new loans to five years from two years. Borrowers with loans received before June 5 can extend their loan term to five years if their lender agrees.
  • Applying for forgiveness early (before the covered period expires/ends), if a borrower has reduced any employees’ salaries or wages by more than the 25% allowed for full forgiveness, the borrower must account for the excess salary reduction for the full eight-week or 24-week covered period, whichever one applies to its loan.  These borrowers s forfeit a safe-harbor provision allowing them to restore salaries or wages by Dec. 31 and avoid reductions in the loan forgiveness they receive.
INSTRUCTIONS FOR PPP LOAN FORGIVENESS
PPP LOAN FORGIVENESS APPLICATION

Additional provisions that are clarified in the new instructions, application, IFR:

  • “If the borrower does not apply for loan forgiveness within 10 months after the last day of the covered period, or if SBA determines that the loan is not eligible for forgiveness (in whole or in part), the PPP loan is no longer deferred and the borrower must begin paying principal and interest. If this occurs, the lender must notify the borrower of the date the first payment is due. The lender must report that the loan is no longer deferred to SBA on the next monthly SBA Form 1502 report filed by the lender” (III. 1.c. Deferral and Forgiveness, Business Loan Program Temporary Changes; Paycheck Protection Program – Revisions to Loan Forgiveness Interim Final Rule and SBA Loan Review Procedures Interim Final Rule) The Flexibility Act provides that if the borrower does not apply for forgiveness of a loan within 10 months after the last day of the covered period, the PPP loan is no longer deferred and the borrower must begin paying principal and interest. As stated above, a borrower may begin paying before the end of the covered period.
  • Health insurance costs for S corporation owners cannot be included when calculating payroll costs; however, retirement costs for S corporation owners are eligible costs. (Journal of Accountancy)
  • Safe harbors for excluding salary and hourly wage reductions and reductions in the number of employees (full-time equivalents) from loan forgiveness reductions can be applied as of the date the loan forgiveness application is submitted. Borrowers don’t have to wait until Dec. 31 to apply for forgiveness to use the safe harbors. (Journal of Accountancy)

Sources:

https://www.journalofaccountancy.com/news/2020/jun/ppp-loan-recipients-can-apply-early-for-loan-forgiveness.html

https://www.journalofaccountancy.com/news/2020/jun/ppp-loan-forgiveness-applications.html

https://www.sba.gov/sites/default/files/2020-06/PPP–IFR–Revisions-to-Loan-Forgiveness-Interim-Final-Rule-and-SBA-Loan-Review-Procedures-Interim-Final-Rule-508.pdf

https://www.sba.gov/about-sba/sba-newsroom/press-releases-media-advisories/sba-and-treasury-announce-new-and-revised-guidance-regarding-paycheck-protection-program

https://www.sba.gov/sites/default/files/2020-06/PPP–IFR–Revisions-to-Loan-Forgiveness-Interim-Final-Rule-and-SBA-Loan-Review-Procedures-Interim-Final-Rule-508.pdf

https://www.journalofaccountancy.com/news/2020/jun/ppp-loan-forgiveness-applications.html

https://s3.amazonaws.com/public-inspection.federalregister.gov/2020-13942.pdf

https://home.treasury.gov/system/files/136/PPP-Loan-Forgiveness-Application-Instructions_1_0.pdfhttps://content.sba.gov/sites/default/files/2020-06/PPP%20Loan%20Forgiveness%20Application%20%28Revised%206.16.2020%29.pdf