Bailey Scarano Blog

PPP Loan Parameters and Application Updated by SBA

Another day, another change. On June 16, 2020, the SBA released a revised PPP Loan Forgiveness Application which replaces the one released on May 15, 2020. The new version integrates PPP changes made in H.R. 7010 (Paycheck Protection Flexibility Act) which was made law on June 5, 2020. This newer version, along with the release of the Revisions to the Third and Sixth Interim Final Rules, provides clarification to some of the lingering questions, such as:

  • 24 weeks vs. 8 weeks: All PPP loan recipients now have 24 weeks to spend their PPP funds, rather than the original 8-week period that was defined when the loans started. Those that received their loan prior to June 5, 2020 can choose which amount of time they prefer to use as their covered period. All borrowers have to state which they are using when they apply for loan forgiveness.
  • Owner compensation: Previously, owner compensation was limited to the equivalent of 8 weeks of 2019 net profit with a cap at $15,385. Now, if you are using the 24-week period of coverage, you can include 2.5 months’ worth of 2019 net profit with a cap at $20,833. 
  • Maximum Employee Compensation: Now those using the 24-week covered period can receive forgiveness for up to $46,154 per employee, which is 24 weeks’ worth of pay at an annual salary of $100,000. (Determine the amount by dividing the employee’s annual 2019 salary by 52 then multiplying that by 24.) For those who prefer to use the 8-week covered period, the cap is $15,385 per employee. 

Much like the 1040-EZ tax return, there is a EZ version of the new PPP Loan Forgiveness application (Form 3508EZ) for those who meet one of the following requirements: 

  • Applicants with no employees: Self-employed individuals, sole proprietors and independent contractors with no employees when the PPP loan was received.
  • Businesses that saw no reductions in headcount or salary: Business owners who did not reduce employee salary or hourly wages by more than 25% during their covered period or compared to Jan 1 – March 31, 2020 and did not lay off any employees or reduce the average paid hours of employees between Jan 1, 2020 and the end of the covered period. 
  • Companies that could not conduct business activities: Businesses that meet the requirement above and were not able to operation during the covered period at the same level of business activity as before February 15, 2020 due to compliance with rules in place due to COVID-19. 

If your business doesn’t meet these requirements, you must complete the more detailed version of the application just released. As always, if you have questions or want any advice on this or any other related matters, don’t hesitate to reach out to us for help.