PPP Loan Forgiveness– Info as of 6/22/20
On June 16, 2020, the SBA released a REVISED Form 3508 Paycheck Protection Program (PPP) Loan Forgiveness Application. The new form helps to clarify the changes enacted by the PPP Flexibility Act of 2020, including:
- Payroll costs can be 60 percent of the loan versus 75 percent
- If you received the loan prior to June 5, 2020 you can choose to use either the eight or 24 week covered period. The covered period started on the date your loan funded.
- If your loan funded on June 5 or later you must use the 24 week period
- Compensation for owners is capped at 2.5x monthly payroll for the 24-week covered period, or similar compensation from 2019, whichever is smaller. The $100,000 cap will limit owner compensation to $20,833 ($100,000 /12*2.5)
- Employee compensation is now capped at $46,154 over the 24-week covered period ($100,000 / 52 * 24)
- Additional certification for FTE Reduction Safe Harbor 1 on PPP Schedule A
- The earliest you can submit Form 3508 Loan Forgiveness Application to apply for loan forgiveness is the end of your 24 week period or December 31, 2020 unless you opt to use the original 8 week period.
- Safe harbor date for restoring payroll and/or headcount is now the earlier of December 31, 2020, or the date of the forgiveness application
The SBA has also released a new Form 3508EZ. A borrower is eligible to use Form 3508EZ if the borrower can satisfy at least one of the following:
- Are self-employed and have no employees
- Did not reduce the salaries or wages of their employees by more than 25 percent, and did not reduce the number or hours of their employees
- Experienced reductions in business activity as a result of health directives related to COVID-19, and did not reduce the salaries or wages of their employees by more than 25 percent.
You Ask – We Answer
Should I use the 8 week covered period or the 24 week period?
The 24 week period will provide a higher amount of forgiveness in most cases. The only reason to elect to use the original 8 week period is if you already achieved maximum loan forgiveness, or you do not plan to keep your average FTE number up over the 24 week period or you just want to obtain loan forgiveness sooner.
Can I use the EZ form?
Many of you will be eligible to use Form 3508EZ, which eliminates the need to complete Schedule A as well as Schedule A Worksheet. However, it will still be important to compute owner compensation and employee limits.
When can I apply for loan forgiveness?
If you choose to use the 24 week period you have to wait until the earlier of Dec 31 or the end of your 24 week period. The advantage of using the 8 week period is that you can apply for loan forgiveness sooner. Your 8 week covered period may end in mid-June but we are still dependent on the bank to instruct how they want documentation submitted.