On June 5, 2020, the Paycheck Protection Program Flexibility Act of 2020 (PPP Flexibility Act) was signed into law. The PPP Flexibility Act modified many of the provisions of the Paycheck Protection Program (PPP) created under the Coronavirus Aid, Relief and Economic Security (CARES) Act in an effort to expand the loans to more businesses.
On June 12, 2020, the U.S. Treasury and Small Business Administration (SBA) announced in a release a that new and revised guidance had been issued to implement the terms of the PPP Flexibility Act. As noted an updated Interim Final Rule (SBA-2020-0036) reflects changes related to loan maturity, deferral of loan payments and forgiveness provisions. In addition, the eligibility threshold for those with felony criminal histories has been changed to expand the qualification to applicants convicted of a felony within the last five years.
The SBA issued revised PPP application forms to conform to these changes. It is important that applicants who want to borrow funds under the PPP use the new Paycheck Protection Program Borrower Application Form.
Revised, Simpler Loan Forgiveness Applications
On June 12, 2020, group of more than 40 bipartisan senators sent a letter to Treasury Secretary Steven Mnuchin and SBA Administrator Jovita Carranza requesting simplification the Paycheck Protection Program (PPP) Loan Forgiveness Application for certain small business loans. The Senators’ letter noted, “We appreciate the interest in appropriately auditing the use of government money. However, the loan forgiveness application – which understandably needs more information for loans worth significantly more than $250,000 – is three times longer than the original application for the PPP.”
The SBA and Treasury took the concerns of these Senators seriously. Although not released with the other updated guidance and forms on June 15, 2020, a 5-page, “borrower-friendly version” of the PPP Loan Forgiveness Applications was released on June 17, 2020. This new application incorporates the changes made by the PPP Flexibility Act.
In addition, a separate 3-page “EZ version,” of the application was introduced to streamline the process for certain borrowers. The EZ application requires fewer calculations and less documentation for eligible borrowers. The EZ form can be used by borrowers who:
- Are self-employed and have no employees; OR
- Did not reduce the salaries or wages of their employees by more than 25%, and did not reduce the number or hours of their employees; OR
- Experienced reductions in business activity as a result of health directives related to COVID-19, and did not reduce the salaries or wages of their employees by more than 25%.
Details regarding the applicability of these provisions are available in the instructions to the new EZ application form.
Both applications give borrowers the option of using the original 8-week covered period (if their loan was made before June 5, 2020) or an extended 24-week covered period. These changes will result in a more efficient process and make it easier for businesses to realize full forgiveness of their PPP loan.
More Changes on the Horizon?
A hearing before the House Small Business Committee was held on June 17, 2020, to allow the Committee to learn about the SBA’s Paycheck Protection Program (PPP) and the issues borrowers and lenders have faced in applying for and using the loans, especially regarding use of proceeds that will qualify borrowers for full loan forgiveness. Lawmakers are also expected to receive suggestions on how to continue optimizing the small business loan program. Click here to view the recorded livestream.
Grossman Yanak & Ford LLP continues to monitor all developments related to PPP loans and the PPP Flexibility Act and will update our clients, contact and friends as new guidance is released. In the interim, should you have questions or comments, please contact Bob Grossman or Don Johnston at 412-338-9300.