The U.S. Senate and House of Representatives unanimously passed legislation extending the Paycheck Protection Program (PPP) deadline to August 8, 2020, and is now awaiting President Trump’s signature. The $659 billion initially allocated for the program aimed at keeping workers on the payrolls of small businesses hadn’t been depleted. However, the original period to apply under the CARES Act ended on June 30.
To date, the Small Business Administration (SBA) has approved nearly five million loans worth $521 billion under the program, leaving around $138 billion untouched. This extension will give businesses additional time to receive a PPP loan and use the proceeds to cover payroll costs and other expenses until the end of the year. It is important to note: this extension does not allow borrowers to receive a second PPP loan.
Congress passed the Paycheck Protection Flexibility Act of 2020 on June 5 to make it easier for small businesses and other PPP borrowers to qualify for full loan forgiveness. Changes in the act include:
- An extension of the “covered period” for loan forgiveness from 8-weeks to 24-weeks
- A reduction of the proportion of proceeds that must be spent on payroll costs to 60% from 75%. Additionally, the cap for non-payroll expenses to be forgiven has increased from 25% to 40%
- The establishment of a safe harbor for businesses that have been unable to return to the level of business activity they had before the COVID-19 pandemic due to compliance with health and safety guidelines
PPP EZ Loan Forgiveness Application
The SBA, in consultation with the U.S. Treasury, also released a revised loan forgiveness application and a new EZ application for the forgiveness of PPP loans. The changes found on these forms reflect the recent updates in the act.
The EZ loan forgiveness application is available to borrowers of all size loans (including those over $2 million) if they can certify they meet specific criteria. The EZ form is notably much easier, requiring less documentation and fewer calculations.
You can find the complete PPP EZ loan forgiveness application instructions here.
Note: a lender may require their own loan forgiveness form in which borrowers should verify with their lenders prior to filling out applications.
Loan Forgiveness Rules
The PPP allows loan forgiveness for payroll costs — including salary, wages, and tips — for up to $100,000 annualized per employee or $15,385 per individual over the eight-week period. The new interim final rule establishes the 24-week maximum for full loan forgiveness at $46,154 per individual.
The loan forgiveness form involves instructions and guidance to help you understand the process, consisting of:
- 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
Additional Loan Terms
Per the SBA website, the following are current loan details:
- An interest rate of 1%
- Loans issued before June 5 have a maturity of two years; loans issued after June 5 have a maturity of five years
- Loan payments will be deferred for six months
- No collateral or personal guarantees are required
- Neither the government nor lenders will charge small businesses any fees
For answers to additional questions regarding the PPP loan and the most up-to-date information, please visit the SBA website. The SBA also has a hotline to help answer questions 1-800-659-2955, seven days a week, from 7:00 a.m. to 9:00 p.m.