The deadline for the second installment of the Paycheck Protection Program (PPP) has been extended. The Paycheck Protection Program Flexibility Act includes changes that should bring a sigh of relief for business owners who continue to struggle to get back on their feet in the wake of COVID-19. Applications are now being accepted through August 8, 2020, and include relaxed rules to qualify for forgiveness.
- Borrowers have the option to extend the 8-weeks to 24-weeks for payroll costs to retain and rehire employees.
- The 75 percent required to be used on payroll expenses has been reduced to 60 percent of the total loan amount. In addition, the cap for forgivable, non-payroll expenses has increased from 25 percent to 40 percent.
- The June 30 deadline for penalties and calculations for reductions in the workforce has been extended to December 31.
- Additional exceptions where the borrower made good faith effort and can document one of the following situations:
- The employer unable to rehire former employees or similarly qualified new employees, or the business was unable to restore business operations due to federal health guidelines and/restrictions related to COVID-19.
- Extended loan repayment period from 2 years to 5 years. This maintains an interest rate of 1 percent.
- Borrowers will be eligible for a 2-year deferral of employer’s share of Social Security payroll taxes.
PPP Loan Forgiveness Rules
It’s important to understand the instructions and fill out the PPP loan forgiveness application. While the current form will need to be updated based on the Paycheck Protection Program Flexibility Act, this application needs to be submitted to the PPP lender you are working with.
For additional background, per the SBA website, the loan forgiveness form includes instructions and guidance to help you understand the process, including:
- Options to help you calculate payroll costs
- Flexibility to include eligible payroll and non-payroll expenses paid or incurred during the covered period
- Step-by-step instructions for how to perform the calculations required by the CARES Act
- Implementation of statutory exemptions from loan forgiveness reduction (based on rehiring by the deadline)
- Exemption from the loan forgiveness reduction for cases where you made a good-faith, written offer to rehire worker(s) that was declined
Please check the SBA website frequently for an updated version and to download the instructions and application form.
What is the new PPP EZ Loan Forgiveness Application?
The PPP Loan Forgiveness Application Form 3508EZ is now available. This EZ form is much easier – there’s less documentation and fewer calculations required.
You can download from the treasury.gov website or here: PPP EZ Loan Forgiveness Application.
There is a checklist available to help you fill out your loan forgiveness application form. These instructions also provide guidance on the documents you will need to include when you submit Form 3508EZ – the actual loan forgiveness application. Be prepared! You can download these instructions directly from the SBA.gov website: SBA Loan Forgiveness Instructions.
- Fact Sheet for Borrowers from the U.S. Treasury
- US Chamber of Commerce 4-Page Guide
- A Law Firm’s Perspective on the details of the Paycheck Protection Program
- An Accounting Firm’s Perspective on the Paycheck Protection Program
- The SBA Page on the Program
- The Full Text of the CARES Act, in case you want to read “from the source”
Please note that this article is provided for informational purposes only. We are not lawyers and do not pretend to be. This article represents our understanding of the situation at the time it was written. Please consult your legal and accounting experts, as well as government websites, and rely on them as the final authority.