The Small Business Administration (SBA) and Treasury Department has issued changes to the Paycheck Protection Program Flexibility Act. These changes include a revised Paycheck Protection Program (PPP) loan forgiveness application as well as an ‘EZ’ version of the forgiveness application, which requires fewer calculations and less documentation from borrowers. The EZ application is applicable for borrowers that are self-employed and have no employees, borrowers that did not reduce the salaries or wages of their employees by more than 25% and did not reduce the number or hours of their employees, and borrowers that experienced reductions in business activity as a result of health directives related to the coronavirus and did not reduce salaries or wages of their employees by more than 25%.

Both the ‘Full’ and ‘EZ’ forgiveness applications give borrowers the option of using the original eight-week coverage period or an extended 24-week coverage period, part of the revisions included in the Paycheck Protection Program Flexibility Act.

The SBA and Treasury also issued a new interim final rule, which implements the 24-week covered period and specifies which expenses are eligible for forgiveness. The actual amount of loan forgiveness will depend on the total amount spent over the 24-week covered period on payroll costs, including salary, wages, and tips up to $100,000 of annualized pay per employee, and covered benefits, the amount spent on owner compensation replacement, the amount spent on payments of interest on mortgage obligations on real or personal property incurred before February 15, and the amount spent on rent payments on lease agreements and utility payments under service agreements dated before February 15.

The interim rule also clarifies that small businesses can qualify for partial loan forgiveness even if 60% of the PPP loan was not directed toward loan forgiveness and provides safe harbor from reductions in loan forgiveness based on full-time equivalent employees, to provide protections for borrowers unable to rehire individuals employed before February 15 and unable to hire employees for unfilled positions by December 31. The rule also states the maturity of PPP loans has been increased to five years from two years.

This article is adapted from the article that originally appeared in JLC's sister-publication, Prosales.