The Small Business Administration (“SBA”) recently released an updated version of the Paycheck Protection Program (“PPP”) loan forgiveness application that includes the updated rules and guidance from H.R. 7010, Paycheck Protection Program Flexibility Act of 2020 (“PPP Flexibility Act”). The SBA also released Form 3508EZ (“the EZ application”), a simplified version of the much longer SBA Form 3508. Either application can be downloaded here.
The EZ application does not include the Schedule A that is required to be completed with SBA Form 3508. Either application can be used for the eight-week covered period or the 24-week covered period.
Employers are eligible to file the EZ application to request loan forgiveness if you meet at least one of the following requirements:
Are self-employed and have no employees (not applicable to nonprofit organizations)
Did not reduce the salaries or wages of employees by more than 25 percent, and did not reduce the number or hours of employees (many nonprofits may qualify here)
Experienced reductions in business activity as a result of health directives related to COVID-19, and did not reduce the salaries or wages of employees by more than 25 percent
If you meet one of these requirements and can file the EZ application, that’s a big deal as it will save you a lot of time, hasten the process for your lender, and reduce the chance of rejections due to errors that are bound to be pervasive with the filing of the longer SBA Form 3508.
Don’t forget that with either application, you may not include salaries for any employee that are in excess of an annualized salary of $100,000, or $15,385 per individual over the eight-week covered period. Under the new 24-week covered period, this equates to $46,154 per individual.
The reduction of the portion of proceeds that must be spent on payroll costs (from 75% to 60%) applies to both the EZ application and the longer SBA Form 3508. Both applications also allow for the same types of expenses (personnel costs, mortgage interest payments, rent/lease payments, and utility payments).
The EZ application and related instructions do not state a maximum PPP loan amount that would require filing of the longer SBA Form 3508 application, which is great news if you otherwise meet the requirements of the EZ application. If you did receive more than $2 million in PPP funding, you are required to check the box on the EZ application, but this does not appear to preclude you from submitting the EZ application.
The aforementioned 24-week covered period is applicable to all PPP loans created on or after June 5, 2020. For those PPP loans created before June 5, 2020, borrowers can use the original eight-week covered period or they can elect to use the new 24-week covered period.