RECENT GUIDANCE ON PPP LOAN FORGIVENESS
New guidance for PPP Loan Forgiveness provides significantly more flexibility for borrowers, along with a simplified application process for many. The Paycheck Protection Flexibility Act was signed into law on June 5. On June 16, borrowers got the option of choosing between two applications, depending on their situation. The new EZ Forgiveness Application is a simpler option for borrowers that qualify.
PPP LOAN FORGIVENESS APPLICATIONS
Borrowers qualify for this option if they:
- 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%.
View the EZ Forgiveness Application (Form 3508EZ)
- Borrowers that do not meet the above criteria must apply via the full forgiveness application.
- View the Full Forgiveness Application (Form 3508)
Paycheck Protection Flexibility Act of 2020
The Paycheck Protection Flexibility Act of 2020 was signed into law on June 5, dramatically improving several critical forgiveness terms of the PPP. The key improvements:
- Extends the 8-week forgiveness period to 24 weeks, permitting any borrower to use the extended time-frame or the original 8-week period.
- Changes the 75%-25% breakdown of payroll to non-payroll expenses to 60%-40%. A minimum of 60% of the loan proceeds must be used for payroll to be eligible for full forgiveness.
- Extends the loan maturity to 5 years for all loans funded June 5th and beyond. Any pre-existing loans may amend the note to reflect new maturity terms if lender and borrower mutually agree.
- Extends the loan forgiveness period from June 30, 2020 to December 31, 2020.
- Does not impact forgiveness application.
- The deferral period of the loan is pegged to date the forgiveness application is submitted to the lender or 10 months after the end of the 24-week covered period.
- Expands safe harbor rules for rehiring employees by allowing for a reduction in employees if borrower is able to document:
- Inability to rehire employees
- Inability to hire similarly qualified employees
- Lack of return to same level of business activity as existed at or before February 15, 2020
IMPORTANT INFORMATION ABOUT PPP APPLICATIONS
If you are looking to apply for a new PPP loan, please visit our Client Support Resources Page.
This summary information is not a substitute for the detailed review and analysis required to complete the forgiveness application process. The SBA continues to issue guidance and clarifications regarding the PPP and loan forgiveness process and we will continue to update you with new developments as they become known.
First Midwest Bank does not provide tax, legal, or accounting advice to our bank clients or borrowers for the SBA PPP. Please consult with your tax, legal and accounting advisors. As the borrower under the program, it is your obligation to understand the SBA’s rules on eligibility and the documentation requirements associated with your loan.