An Easier Path to Full Forgiveness for PPP Loan Recipients
Shorter forgiveness application forms provide more clarity and ease for small-business and self-employed loan recipients
Updated July 4, 2020: President Donald Trump signed into law today legislation that extends the deadline to file new PPP applications to Aug. 8.
The federal government has released a revised five-page form and a new three-page “EZ” form that make it easier for businesses with federal Paycheck Protection Program loans to have them forgiven. The PPP loans are part of the government’s relief program for small businesses during the coronavirus pandemic.
The forms, announced by the U.S. Treasury and the Small Business Administration on June 17, provide some reassurance to business owners who had feared being left with substantial debt if they weren’t able to rehire employees at pre-pandemic levels. They also make loan forgiveness easier for self-employed business owners and borrowers with straightforward cases.
The federal government has released a revised five-page form and a new three-page “EZ” form that make it easier for businesses with federal Paycheck Protection Program loans to have them forgiven. The PPP loans are part of the government’s relief program for small businesses during the coronavirus pandemic.
The forms, announced by the U.S. Treasury and the Small Business Administration on June 17, provide some reassurance to business owners who had feared being left with substantial debt if they weren’t able to rehire employees at pre-pandemic levels. They also make loan forgiveness easier for self-employed business owners and borrowers with straightforward cases.
Revised Five-Page ‘Safe Harbor’ Loan Forgiveness Application Form
A revised five-page forgiveness application form makes it simpler for small businesses unable to rehire all of their employees — due to shutdown orders or other restrictions — to receive full loan forgiveness.
The new form slashes the need for documentation by providing a “safe harbor” option that allows loan recipients to simply check a box indicating they were unable to operate “at the same level of business activity” as a result of social distancing rules or any other worker or customer safety requirements related to COVID-19.
A revised five-page forgiveness application form makes it simpler for small businesses unable to rehire all of their employees — due to shutdown orders or other restrictions — to receive full loan forgiveness.
The new form slashes the need for documentation by providing a “safe harbor” option that allows loan recipients to simply check a box indicating they were unable to operate “at the same level of business activity” as a result of social distancing rules or any other worker or customer safety requirements related to COVID-19.
New Three-Page ‘EZ’ Loan Forgiveness Application Form
The SBA also released a new three-page “EZ” forgiveness application form for self-employed business owners and other borrowers with straightforward cases. To qualify, they must meet the following requirements:
New SBA Rule for Self-Employed Borrowers
In addition to the two forms, the SBA published a new rule on June 19 that clarifies how to calculate “owner compensation” for self-employed borrowers. The new rule will essentially guarantee that self-employed business owners, freelancers and contractors will have their PPP loans fully forgiven if they choose the 24-week covered period.
The new rule allows you to calculate “owner compensation” to be forgiven at 2.5 months’ worth of 2019 net profits (up to $20,833). Since this is the same formula that was used to calculate the maximum amount of your loan, the new rule effectively guarantees the entire loan will be forgiven.
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The SBA also released a new three-page “EZ” forgiveness application form for self-employed business owners and other borrowers with straightforward cases. To qualify, they must meet the following requirements:
- 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%
New SBA Rule for Self-Employed Borrowers
In addition to the two forms, the SBA published a new rule on June 19 that clarifies how to calculate “owner compensation” for self-employed borrowers. The new rule will essentially guarantee that self-employed business owners, freelancers and contractors will have their PPP loans fully forgiven if they choose the 24-week covered period.
The new rule allows you to calculate “owner compensation” to be forgiven at 2.5 months’ worth of 2019 net profits (up to $20,833). Since this is the same formula that was used to calculate the maximum amount of your loan, the new rule effectively guarantees the entire loan will be forgiven.
Tell us: Have you applied for help from the federal government for small businesses? If so, please tell us about your experience in the Comments.
More for Pros on Houzz
Read stories in our Resilience series
Learn about Houzz Pro software
Talk with your peers in the Pro-to-Pro discussions
Join the Houzz Trade Program
The loan program, though generally popular, left some small-business owners concerned about the time requirements and flexibility for using the funds in light of shutdown orders and other restrictions. Lawmakers addressed this with the Paycheck Protection Program Flexibility Act, signed into law June 5, which promised greater flexibility for loan recipients and more time to meet requirements that would make the loans forgivable.
The revised five-page form and the new three-page “EZ” form follow up on that promise by cutting down on the documentation required for loans to be forgiven. Read on for more details about the forms and what they might mean for your business.