PPP Loan updates and Form 3508EZ

If you are a small business owner interested in making use of the benefits of the Paycheck Protection Program, there has been recent guidance to clarify some points of the recent PPP Flexibility Act. One of the main points of confusion had been the requirement for loan forgiveness that at least 60% of the funds must be spent on payroll, otherwise the business could not apply for any loan forgiveness. The Small Business Administration (SBA) and U.S. Treasury updated that information as of June 8, 2020. This clarification indicates that while full forgiveness requires 60% of loan funds be spent on payroll, a business may still apply for partial forgiveness of the loan if payroll allocation is less than 60%.  

To accompany the changes enacted with the PPP Flexibility Act, there will be changes to the forms required. Per the organizations involved, there will be a modified loan forgiveness application and a modified borrower application, along with more guidance, available soon.

In other current PPP news, the SBA and U.S. Treasury have recently published a new EZ application for loan forgiveness. This application, form 3508EZ, is modified from the full application to require less documentation and fewer calculations to complete. However, to qualify for use of the two-page EZ application, the borrower must fully meet one of the following conditions:

• The borrower is an independent contractor, a sole proprietor who had no employees at the time of the PPP loan application, or a self-employed individual.
• The borrower did not reduce the average paid hours of employees or the number of employees between 1/1/2020 and the end of the covered period, and during that period, also did not reduce the annual salary or hourly wages of any employee by more than 25%.
• The borrower was unable to operate during the covered period at the same activity level as before 2/15/2020 due to compliance with requirements issued between 3/1/2020 and 12/31/2020 by the Director of the CDC, OSHA, or the Secretary of Health and Human Services, and the borrower did not reduce annual salary or hourly wages of any employee by more than 25% during the covered period.

Per the guidance released by the SBA, one of these requirements must be fulfilled in full in order to be eligible to use SBA Form 3508EZ. To access the application, click here. We will continue to update you with relevant information as it becomes available.