Borrower-Friendly Application For PPP Loan Forgiveness

The U.S. Treasury Department and Small Business Administration (SBA) posted a revised, borrower-friendly Paycheck Protection Program (PPP) loan forgiveness application. The new application implements President Trump’s PPP Flexibility Act of 2020 signed into law on June 5.

The PPP gave small businesses access to loans that are forgiven if the proceeds were used for payroll, mortgage, rent, and utility costs as well as maintaining employee and their compensation levels for eight weeks. The program was created under the $2.2 trillion CARES Act, a coronavirus relief law aiming to assist individuals and businesses from the effects of the Covid-19 pandemic.  

PPP Program Concerns

The new application came after concerns raised by lawmakers from both sides of how small businesses were having trouble accessing the loans or applying for them. Small businesses claim the initial form was so complex they had to hire lawyers and accountants to correctly and successfully apply. Large companies also accessed the loans through their banks quickly depleting the funds.

Constant changes have been made to the eligibility and forgiveness criteria in an attempt to encourage more small businesses to sign up. However, many still feel the Treasury and the SBA are not providing more transparency about loan accessibility and eligibility for loan forgiveness.

PPP Flexibility Act of 2020

The PPP Flexibility Act addresses the raised concerns by small businesses in an attempt to apply for forgivable loans. The Act extends the covered period from eight to 24 weeks. Businesses are also required to ensure 60% of the funds are used for payroll costs down from 75%. These changes come with a three-page “EZ” Paycheck Protection Program loan forgiveness application which requires fewer calculations and less documentation than previous application. Form 3508EZ requires borrowers to meet any one of these criteria:

  • Applied for the PPP loan as self-employed, an independent contractor, or a sole proprietor with no employees.
  • Did not reduce salary or wages for any employee by more than 25%, and did not reduce the number of hours of their employees (excepting laid-off employees who refused an offer to return).
  • Did not reduce salary or wages for any employee by more than 25% during the covered period and experienced reductions in business activity as a result of health directives related to COVID-19.

Business owners who received their PPP loans before June 5 have an option to calculate their forgiveness based on either the original 8-week covered period or the extended 24-week period.

The Treasury and the SBA hailed the new changes and are expected to smooth the forgiveness application process for business owners with PPP loans.