The SBA released two new applications for PPP forgiveness, as the follow-up to the PPP Flexibility Act that recently passed in Congress. The SBA developed a simplified application, the EZ application, which is three pages, and the regular application is now five pages. To use the EZ application, you must meet one of the below criteria:
- you are a self-employed, independent contractor or sole proprietor and have no employees or
- you did not reduce the wages of your employees by more than 25%, and you did not reduce FTEs by the end of the covered period (safe harbors and exceptions apply), or
- you experienced reductions in business activity as a result of health directives related to COVID-19 and did not reduce salaries or wages of your employees by more than 25%.
If none of these three apply, you must use the Full Forgiveness application.
- If you use a 24-week Covered Period, compensation can’t exceed 2.5 months’ worth of 2019 compensation for any owner-employee or self-employed individual/general partner, capped at $20,833 per individual;
- If the Borrower has elected an 8-week Covered Period, compensation can’t exceed eight weeks’ worth of 2019 compensation for any owner-employee or self-employed individual/general partner, capped at $15,385 per individual.
- For employees that are non-owners, the compensation limit is $46,154 per individual for the 24-week period, which is the new prorated amount of the original $100,000 annual limit.
- The application form is the same for the 8-week Covered Period and the 24-week Covered Period
- 60/40% split for payroll and non-payroll costs is now included in the application
- Paid or incurred rules are the same as previous applications and apply to both the 8- or 24-week Covered Period.
The updated applications can be found here:
Eight weeks or 24 weeks – Which should I choose?
Here are the key items to consider when deciding which covered period works best for your situation:
- If you can spend all of your loan on eligible costs that allow you to receive maximum forgiveness, the 8-week covered period may be right for you.
- If you have not been able to spend appropriate loan proceeds (60% on payroll costs), choosing the 24-week covered period may be a better fit. However, if you select the 24-week period and your FTE employee count and/or employee wages decrease and are not restored by December 31, you could lose some loan forgiveness. We recommend that you consult your advisor on how to proceed before submitting your PPP forgiveness application.
As a reminder, please use our Loan Forgiveness Calculation Templates to help you determine which covered period is most beneficial for your situation, and as always, reach out to our team with any questions.