SBA Announces New, ‘Borrower-friendly’ PPP Loan Forgiveness Applications

The Small Business Administration announced they had posted a 5-page forgiveness application after complaints the original, 11-page application was too complex to navigate.

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The new form will help small to medium-sized businesses (SMBs) easily document the funds they utilized from the PPP.

Working with the Department of the Treasury, the Small Business Administration (SBA) announced it’s offering revised versions of the Paycheck Protection Program (PPP) loan forgiveness application, making it more “borrower-friendly.”

The two, new streamlined forms help SMBs, sole proprietorships, and the self-employed to easily apply for loan forgiveness. The forms also include the option of increasing the covered period to rehire and pay employees from 8 weeks to 24 weeks.

Updated full forgiveness application 

The new PPP Loan Forgiveness Application is available online. It was revised on June 16, 2020m and applies to all businesses with more than 1 employee.

Many business owners criticized the original PPP forgiveness form as too complex. The new form — cut from 11 pages down to 5 — includes an instruction page that should make it easier for SMBs to understand and apply for loan forgiveness.

The application asks for less documentation from the business owner and streamlines the calculations that will need to be made. The new form provides an option for borrowers to use the original 8-week period to document their costs, if their loan was processed before June 5, 2020, or take advantage of the longer, 24-week covered period that was recently approved with the Paycheck Protection Program Flexibility Act (PPPFA).

EZ Forgiveness Application

The SBA and also unveiled a 3-page application that applies to certain borrowers.

Those borrowers include:

  • Self-employed entities or those who businesses that have no employees; or
  • Companies that did not reduce the number of hours for their employees and did not reduce employee wages or salaries by more than 25%; or
  • Business that experienced reductions in revenue as a result of health directives (mandatory shutdowns, slowdowns or reductions in the amount of patrons allowed within the location) and did not reduce employee wages by more than 25%.

The EZ Application needs fewer calculations from the business owner and requires less documentation for borrowers who were eligible under the PPP.

What costs are eligible for loan forgiveness?

Both forms allow SMBs to apply for loan forgiveness up to 60% of the loan amount for costs for the 24-week period from the beginning of the loan, provided certain wages were not reduced by more than 25%. If you applied for a PPP loan before June 5, you have the option to extend the original 8 week covered period to 24 weeks. These costs include:

Payroll expenses

  • Payroll costs up to $46,154 per employee for the 24-week period, including gross salary, wages, commissions, tips, vacation pay, and severance pay
  • Parental, family, medical or sick leave pay unless the employer was reimbursed for the leave under the Families First Coronavirus Response Act)
  • Employer contributions to group health care coverage
  • Employer portion of contributions to employee retirement plans
  • State and local taxes assessed on employee wages

For independent contractors or sole proprietors, payroll costs only include salary, commissions, income, or net earnings.

Non-payroll expenses

  • Mortgage interest payments
  • Rent or lease payments, provided the lease was in force before February 15, 2020
  • Utility payments, including all utility services in force before February 15, 2020: electricity, natural gas, water, telephone, and internet access

For independent contractors or sole proprietors, non-payroll expenses must be eligible to claim as legitimate business deductions on IRS 2019 Form 10. 

The fine print

Full loan forgiveness for payroll expenses is allowed for employees who earned less than $100,000 per year in 2019, or were not employed by the business in 2019. For staff members earning more than $100,000 per year, or for any staff member whose wages were reduced by more than 25% during the 24-week covered period, the amount of loan forgiveness will be reduced, based on the amount of the reduction in pay.

The SBA writes, “These changes will result in a more efficient process and make it easier for businesses to realize full forgiveness of their PPP loan.”

To help businesses better understand their options under the PPP and PPPFA programs, the U.S. Chamber of Commerce has issued a Guide to PPP Loan Forgiveness that outlines everything a business needs to know for eligibility and documentation.

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