On August 4, the Small Business Association and Department of the Treasury released a 10-page document to address 23 of the most frequently asked questions (FAQs) from borrowers on PPP loan forgiveness. This was then followed up on August 11, with some additional PPP loan FAQs and additional PPP loan forgiveness FAQs. The new guidance covers how to calculate how much of your PPP loan may be forgivable in 4 areas: general loan forgiveness, payroll costs, non-payroll costs, and loan forgiveness reductions.
As of August 12, 2020, the SBA began accepting PPP Loan Forgiveness applications with the option of using one of two application forms to apply for forgiveness, SBA Form 3508 and SBA Form 3508EZ.
The EZ Form (Form 3508EZ) applies if you meet any one of these three criteria:
- Are self-employed and have no employees; OR
- 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; OR
- 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%.
Borrowers with more complicated cases who are not able to use the EZ form will still need to fill out the standard, lengthier loan forgiveness application.
Forgiveness Eligibility
The loan covers expenses for either 8 weeks or 24 weeks (depending on choice or if the loan was dated on or after June 5th) starting from the loan origination date, or until December 31, 2020, whichever occurs first. At least 60 percent of the PPP loan must be used to fund payroll and employee benefits costs. The remaining 40 percent can be spent on mortgage interest payments, rent and lease payments, or utilities. If these guidelines are met – and there was no reduction in FTEEs in comparison to a chosen reference period and there was no reduction in wages in comparison to a defined reference period - you’ll be able to have 100% of the loan forgiven.
