The purpose of this page is to assist you in navigating your Paycheck Protection Program (PPP) Forgiveness application. The PPP is a program that is offered by the Small Business Administration (SBA) and administered by your bank. You may have applied for the Economic Injury Disaster Loan and Grant (EIDL). The EIDL Grant offered $1,000 to the company per employee, up to a total of $10,000. The Grant ran out of funds on April 16th but is now accepting applications again. The EIDL Loan was offered directly from the SBA in varying amounts up to $150,000. The PPP application was submitted to your bank and approved by the SBA. Round 2 funding of the PPP began on April 27, 2020.
On June 5, 2020, the Paycheck Protection Program Flexibility Act of 2020 became law. On June 17, 2020, the SBA released its revised itsPPP forgiveness application.
There are two Forgiveness Forms, (A) PPP Loan Forgiveness Application Form 3508EZ and (B) Loan Forgiveness Application Revised June 16, 2020.
You are allowed to file the the EZ form if 1 OR 2 OR 3 applies to you:
1. The Borrower is a self-employed individual, independent contractor, or sole proprietor who had no employees at the time of the PPP loan application and did not include any employee salaries in the computation of average monthly payroll in the Borrower Application Form.
2. The Borrower did not reduce annual salary or hourly wages of any employee by more than 25 percent during the Covered Period or the Alternative Payroll Covered Period (as defined below) compared to the period between January 1, 2020 and March 31, 2020 (for purposes of this statement, “employees” means only those employees that did not receive, during any single period during 2019, wages or salary at an annualized rate of pay in an amount more than $100,000);ANDThe Borrower did not reduce the number of employees or the average paid hours of employees between January 1, 2020 and the end of the Covered Period. (Ignore reductions that arose from an inability to rehire individuals who were employees on February 15, 2020 if the Borrower was unable to hire similarly qualified employees for unfilled positions on or before December 31, 2020. Also ignore reductions in an employee’s hours that the Borrower offered to restore and the employee refused. See 85 FR 33004, 33007 (June 1, 2020) for more details.
3. The Borrower did not reduce annual salary or hourly wages of any employee by more than 25 percent during the Covered Period or the Alternative Payroll Covered Period (as defined below) compared to the period between January 1, 2020 and March 31, 2020 (for purposes of this statement, “employees” means only those employees that did not receive, during any single period during 2019, wages or salary at an annualized rate of pay in an amount more than $100,000);ANDThe Borrower was unable to operate during the Covered Period at the same level of business activity as before February 15, 2020, due to compliance with requirements established or guidance issued between March 1, 2020 and December 31, 2020 by the Secretary of Health and Human Services, the Director of the Centers for Disease Control and Prevention, or the Occupational Safety and Health Administration, related to the maintenance of standards of sanitation, social distancing, or any other work or customer safety requirement related to COVID-19.
If you cannot say YES to 1, or 2, or 3 above, you should complete the Revised Form.
Aside from the standard information such as your business name, address, EIN, and SBA Loan Number, you will need some critical information.
- PPP Loan Amount
- PPP Loan Disbursement Date
- # of Employees at time of Application
- # of Employees at time of Forgiveness Application
- EIDL Advance
- Payroll Schedule (Weekly Monthly Bi-Weekly)
You need to figure your covered period. The covered period is the 24-week period beginning your loan disbursement date. If your loan was disbursed April 13, 2020, the covered period begins April 13, 2020 and ends on or about September 27, 2020. Twenty-four (24) weeks is defined as 168 days. It cannot extend past December 31, 2020.
If you loan disbursement date was before June 5, 2020, then you may use the alternate payroll covered period. That is the 8 weeks beginning on your loan disbursement date. Therefore, if your loan was disbursed April 13, 2020, then the alternative covered period ends June 7, 2020. Eight (8) weeks is defined as 56 days.
The basic calculation on the EZ form and the Revised Form is as follows:
EZ FORM Calculation
What is your covered period? 8 weeks or 24 weeks? You must use that period throughout the application. For the selected period enter:
- Payroll Costs $___________ Did you select 8 or 24 weeks–run both scenarios Just in case. (the max employee compensation allowed is $15,385 if 8wks or $46,254 if 24wks) AND (the max owner/self-employed compensation allowed is the lower of: 8/52 of 2019 comp. or $15,385, if 8 wks – or – the lower of: 2.5x 2019 avg. monthly comp. or $20.833, if 24wks)
- Business Mortgage Interest Payments $___________ on real or personal property. The obligation must have originated prior to February 15, 2020 to be allowed.
- Business Rent or Lease Payments $___________ The lease agreement must have originated prior to February 15, 2020 to be allowed.
- Business Utility Payments $___________ The service must have began prior to February 15, 2020 to be allowed.
- TOTAL of 1, 2, 3, and 4 $___________
- PPP Loan Amount $___________
- Payroll Cost 60% Requirement (divide Line 1 by 0.60): $___________ Yes: take the total payroll costs and divide it by 0.6, which is 60%.
- Forgiveness Amount (enter the smallest of Lines 5, 6, and 7): $___________ Note: If applicable, SBA will deduct EIDL Advance Amounts from the forgiveness amount remitted to the Lender.
For a more in-depth discussion, see Alexander Tecle’s and Charles Zimmerer’s discussion about Key Takeaways For PPP Loan forgiveness.