Yesterday the US Small Business Administration (SBA) made it easier to apply for your Paycheck Protection Program (PPP) loan waiver.
New EZ application and revisions of the full forgiveness application
The SBA, in consultation with the Treasury Department, announced a brand new Form 3508EZ that certain PPP borrowers can use to apply for waiver. The SBA also made borrower-friendly revisions to the full waiver application. These changes are designed to make the application process easier for borrowers and increase efficiency for lenders and borrowers alike.
New EZ allocation application
The new EZ Request (two pages) that you want to use when you are eligible requires less calculations and less documentation than the revised Full Forgiveness Request (FFA), which is four pages.
The authorization to use the EZ form is restricted
In order to use the EZ form, PPP borrowers must meet the following criteria, taken from yesterday’s SBA press release:
- “Are self-employed and have no employees; OR”
- “Has not reduced the salaries or wages of its employees by more than 25% and has not reduced the number or hours of its employees; OR”
- “Experienced a reduction in business activity due to health policies related to COVID-19 and did not reduce the salaries or wages of its employees by more than 25%.”
To determine if EZ is the way to go, you need to see if you qualify.
My advice: focus on page 1 of the Instructions to the EZ. You will find a checklist with three checkboxes. If you can tick any of these boxes, you can use Form EZ. The first field is, for example, for a self-employed person without an employee.
Then read page 2 of the EZ itself, which contains the certifications (these are also included in the checklist).
Can you confirm this statement?
“The Borrower did not cut salaries or hourly wages for any employee by more than 25 percent during the Covered Period or the Covered Alternate Payroll Period compared to the period between January 1, 2020 and March 31, 2020,” Employee “includes only those Employees who received wages or salaries in excess of $ 100,000 annually during a single period in 2019. “
If so, can you confirm either of the following two statements? You can find them below on page 2 of the EZ:
“The borrower has the number of employees or the average hours paid by the employees between the 1st, if the borrower on or before the 31st.
“The Borrower was able to work between February 15, 2020 and the end of the Covered Period due to compliance between March 1, 2020 and March 31, 2020, by the Minister of Health and Human Services, the Director of the Centers for Control and Prevention of diseases or the occupational safety and health authorities in relation to compliance with hygiene standards, social distancing or other occupational or customer safety requirements in connection with COVID-19. “
If you cannot confirm these statements, use the FFA, not the EZ.
What are the differences between the forms?
If PPP borrowers do not meet the requirements of the EZ application, they must do the Revised request for full forgiveness.
The development cooperation application requires the following information (the numbers refer to “lines” in the application):
- Labor costs
- Interest payments on corporate mortgages
- Rent or lease payments for companies
- Payments for utility companies
- Add lines 1, 2, 3 and 4 to get the possible award amount
- Loan amount
- Labor cost requirement of 60% (divide line 1 by 0.6)
- Award amount (the smallest of lines 5, 6 and 7)
The FFA asks for the same information as 1 through 4, and FFA lines 8 through 11 are the same as EZ lines 6 through 8.
FFA adds new lines 5, 6, and 7 to the form, containing information from PPP Appendix A (page 4) to accommodate adjustments for full-time equivalents (FTE) and wage / hourly wage cuts.
There is no equivalent Appendix A for EZ.
That brings the number of lines to eleven instead of eight for EZ.
I should mention that help is available to fill out these forms. I would contact my payroll provider first.
Some payroll providers (e.g. Paychex) have online estimators that can help you get the process under control before completing an EZ or FFA. Paychex’s interactive PPP lending estimator is pretty impressive.
For example, it helps you sift through the data you need for Schedule A, explains adjustments to full-time downsizing, and helps calculate average full-time equivalents. It’s worth a try.
There’s more to come
The issue of forgivable PPP loans is still an evolving one. The two applications will make the lending process easier for business owners – and that’s good news.