SBA releases new PPP application for forgiveness

ppp Jun 22, 2020

The U.S. Small Business Administration (SBA) released a new PPP application for forgiveness of PPP loans.

The application reflects changes to the PPP made by the Paycheck Protection Flexibility Act of 2020, P.L. 116-142, which became law June 5, 2020.

You can download the application and instructions

The Paycheck Protection Flexibility Act makes it easier for PPP borrowers to qualify for full loan forgiveness in the following ways:

  • The “covered period” for loan forgiveness was expanded from 8 weeks to 24 weeks
  • The proportion of proceeds that must be spent on payroll costs was reduced from 75% to 60%
  • A safe harbor was created for businesses that have been unable to return to the level of business activity they had before the COVID-19 pandemic due to compliance with health and safety guidelines for slowing the spread of the virus
  • The minimum term for PPP loans is increased to five years for all loans made on or after June 5.
  • For loans made before June 5, both the borrower and the lender must agree to extend the original loan term from two to five years.

Several big changes were incorporated into the revised PPP Loan Forgiveness Application and instructions, such as: 

  • Health insurance costs for S corporation owners cannot be included when calculating payroll costs even though retirement costs for S corporation owners are eligible costs.
  • Borrowers who received their PPP loans before June 5 can choose between using the original eight-week covered period or the new 24-week covered period.
  • The employee compensation limit for the 24-week period is three times the eight-week limit.
  • The PPP allows loan forgiveness for payroll costs up to $100,000 annualized per employee, or $15,385 per individual over the eight-week period and $46,154 for the 24-week period.
  • Schedule C owner compensation is calculated for the eight-week period as 8 ÷ 52 × 2019 net profit, up to a maximum of $15,385.
  • Schedule C owner compensation is calculated for the 24-week period as 2.5 months (2.5 ÷ 12) of 2019 net profit, up to $20,833.

More information is available on the SBA website

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