News

PPP Loans – Early Forgiveness Available, SBA Issues New Forgiveness Applications

24 June 2020

Late last week, the U.S. Small Business Administration (SBA) issued revised PPP Loan Forgiveness Applications, and on Monday, June 22, 2020 they issued a new Interim Final Rule, bringing the application into conformity with the Paycheck Protection Program Flexibility Act, which was signed into law by President Trump on June 5, 2020.

We use the plural, as the SBA has not only updated Form 3508, PPP Loan Forgiveness Application and Instructions, but has also issued Form 3508EZ and Instructions.

Per the Form 3508EZ Instructions, this simplified form can be used by borrowers who fulfill any one of three criteria:

1. “The Borrower is a self-employed individual, independent contractor, or sole proprietor who had no employees at the time of the PPP loan application and did not include any employee salaries in the computation of average monthly payroll in the Borrower Application Form (SBA Form 2483).”

OR

2. “The Borrower did not reduce annual salary or hourly wages of any employee by more than 25 percent during the Covered Period or the Alternative Payroll Covered Period (as defined below) compared to the period between January 1, 2020 and March 31, 2020 (for purposes of this statement, “employees” means only those employees that did not receive, during any single period during 2019, wages or salary at an annualized rate of pay in an amount more than $100,000);
AND
The Borrower did not reduce the number of employees or the average paid hours of employees between January 1, 2020 and the end of the Covered Period. (Ignore reductions that arose from an inability to rehire individuals who were employees on February 15, 2020 if the Borrower was unable to hire similarly qualified employees for unfilled positions on or before December 31, 2020. Also ignore reductions in an employee’s hours that the Borrower offered to restore and the employee refused. See 85 FR 33004, 33007 (June 1, 2020) for more details.”

OR

3. “The Borrower did not reduce annual salary or hourly wages of any employee by more than 25 percent during the Covered Period or the Alternative Payroll Covered Period (as defined below) compared to the period between January 1, 2020 and March 31, 2020 (for purposes of this statement, “employees” means only those employees that did not receive, during any single period during 2019, wages or salary at an annualized rate of pay in an amount more than $100,000);
AND
The Borrower was unable to operate during the Covered Period at the same level of business activity as before February 15, 2020, due to compliance with requirements established or guidance issued between March 1, 2020 and December 31, 2020 by the Secretary of Health and Human Services, the Director of the Centers for Disease Control and Prevention, or the Occupational Safety and Health Administration, related to the maintenance of standards of sanitation, social distancing, or any other work or customer safety requirement related to COVID-19.”


The SBA’s June 22, 2020 interim final rule clarifies that borrowers may apply for PPP loan forgiveness prior to the end of their covered period, whether they elect an 8-week or a 24-week covered period. However, this can be a two-edged sword, as those borrowers applying for early loan forgiveness forfeit the safe-harbor provision which allows them to restore reduces salaries or wages by December 31, 2020 to avoid having to reduce the amount of the loan which is eligible for forgiveness.

PPP loan maturity can be extended from 2 to 5 years, if both borrower and lender agree – lenders may be reluctant to extend the maturity date, as interest on PPP loans is 1%.

Sole proprietors who elect a 24-week covered period are eligible for payroll-related loan forgiveness of up to $20,833, an increase from the limit of $15,385 for an 8-week covered period. These maximum loan forgiveness amounts are based upon a maximum covered owner compensation of $100,000 annually.

Stay tuned for further developments, which we all know will be forthcoming!

If you have questions on the PPP, please click here to email us directly – we are here to help.