Updated PPP Loan Program Guidance and Revised Loan Forgiveness Applications

The Paycheck Protection Program Flexibility Act of 2020 (the “PPPFA”) was signed into law on June 5, 2020.  The PPPFA amends certain portions of the Coronavirus Aid, Relief and Economic Security Act (the “CARES Act”).

In short, the PPPFA provides additional flexibility regarding both the amount of time and the manner in which borrowers may use Paycheck Protection Program (“PPP”) loan proceeds. You can read more about that here.

Upon enactment of the PPPFA, the Treasury and the SBA announced that additional guidance would be issued to address changes under the PPPFA.  It was also noted that the PPP loan forgiveness application would be modified.

The SBA has now updated certain of the interim rules that had been issued prior to enactment of the PPPFA.  Most importantly, the updated interim rule clarifies that reductions in loan forgiveness would not apply with respect to reductions in full time employee equivalents (FTE) so long that FTE levels are returned to the same level in place prior to the covered period by December 31, 2020.

The SBA has also issued two new loan forgiveness applications:  (1) an updated loan forgiveness application (Form 3508 - available here) and (2) a new EZ loan forgiveness application (Form 3508EZ - available here).

A borrower may use the EZ loan forgiveness application only if one of the following three items apply:

1. The borrower is a self-employed individual, independent contractor, or sole proprietor and had no employees at the time of the PPP loan application and did not include any employee salaries in the PPP loan amount calculation.
2. The Borrower did not (A) reduce annual salary or hourly wages of any employee by more than 25% during the PPP loan period compared against the period of time between January 1, 2020 and March 31, 2020, or (B) reduce the number of employees or the average paid hours of employees between January 1, 2020 and the end of the covered period.
3. The Borrower did not (A) reduce annual salary or hourly wages of any employee by more than 25% during the PPP loan period compared against the period of time between January 1, 2020 and March 31, 2020, or (B) was unable to operate during the covered period at the same level of business activity as before February 15, 2020, due to compliance with COVID-19 requirements established between March 1, 2020 and December 31, 2020.

This information is only an overview of the highlights of the numerous changes enacted under the PPPFA.  It is crucial for borrowers to gain a complete understanding of the PPP loan program and the modifications under the PPPFA.  If you have any questions, or if you require assistance with your PPP Loan application or forgiveness application, please let us know.  We have a Coronavirus Task Force ready to help.