Guidance released from the Treasury and Small Business Association (SBA) Monday, June 22 declares that Paycheck Protection Program (PPP) recipients can apply for loan forgiveness before the end of their Covered Period.
The 34-page interim rule addresses a few issues concerning the Payment Protection Program, which provides forgivable loans to small businesses and organizations affected by the economic impacts of the COVID-19 pandemic. Namely, it revised previous guidance to reflect changes made by the Paycheck Protection Program Flexibility Act (PPPFA).
A PPP recipient can apply for loan forgiveness before the end of their Covered Period with the following stipulations:
- If the borrower applies early and has reduced any employees’ salaries or wages by more than 25%, they must account for this reduction for the full 8-week or 24-week period (whichever applies to the borrower’s loan), and
- Borrowers that apply early for PPP loan forgiveness forfeit the safe-harbor provision that allows them to restore wages or salaries by December 31 to avoid reductions in loan forgiveness.
Revised Payment Protection Program Loan Forgiveness Application
The new interim rule came out right after the SBA released the revised PPP loan forgiveness application on June 16, reflecting changes made to the legislation by the PPPFA. The SBA also released a new EZ PPP forgiveness application, which grants full PPP loan forgiveness and requires less documentation and fewer calculations than the full application.
PPP borrowers may use the 3508EZ application to apply for loan forgiveness if they meet one of the following criteria:
- They are a self-employed individual, sole proprietor or independent contractor and have no employees on their payroll;
- They did not reduce their employees’ hours and headcount during the Covered Period and they did not reduce their employees’ salaries and wages by more than 25% under the Covered Period; or
- They could not operate or experienced reductions in business during the Covered Period due to COVID-19 health directives and they did not reduce their employees’ salaries and wages by more than 25%.
Author: Megan O’Donnell