Simplified PPP Loan Forgiveness Application Announced

Regulation | June 17, 2020 | by Brendan Flinn

On June 16, the Small Business Administration and the Department of Treasury announced a simplified loan forgiveness application for PPP borrowers. This article provides information on the simplified application form for LeadingAge members.

On June 16, the Small Business Administration and the Department of Treasury announced a simplified loan forgiveness application for PPP borrowers. This application is much shorter than the original application and requires borrowers to submit less data to their lender and the federal government.

Members can find the new form (with an “EZ” suffix) and associated instructions linked below.

Notably, the EZ application form requires less detail from PPP borrowers and does not require the PPP worksheet, which in the longer application requires borrowers to include employee-level detail on how PPP dollars are used.

About the EZ Application Form

PPP borrowers who use the “EZ” form need to submit basic information about their loan, including the amount, disbursement date, and the covered period for which they are applying the loan.

In the next section of the form (titled Payroll and Nonpayroll Costs), borrowers are required to enter how much they spent on each of the four allowable costs for PPP funds: payroll, mortgage interest, rent and utilities.

In the section following that, titled Potential Forgiveness Amounts, borrowers enter three figures: the total amount they spent on the four cost areas listed in the previous section, the amount of PPP loan they received, and a calculation that shows how their payroll costs fit into the 60% payroll rule. The lowest of the three numbers entered here is how much borrowers can get forgiven (section titled Forgiveness Amount). A case example is below.

Payroll and Nonpayroll costs:

  • Payroll costs: $75,000
  • Mortgage Interest: $0
  • Rent: $30,000
  • Utility Payments: $15,000

Potential Forgiveness Amounts:

  • Total of Payroll and Nonpayroll Costs: $120,000
  • PPP Loan Amount: $120,000
  • Payroll Cost 60% Requirement (divide Payroll Costs by 0.6): $125,000

Forgiveness Amount: $115,000

In this scenario, the PPP borrower received a $120,000 loan and spent all of the money. $75,000 of those funds went to payroll, representing 62.5 percent of the loan funds. Because $120,000 was the lowest of the potential forgiveness amounts, that is how much the borrower will have forgiven. If the borrower used less than 60% of the money for payroll, they would only be forgiven for however much of their loan their payroll costs represent 60% of loan funds (see updated guidance summary from LeadingAge for more information).

Attestations

In order to use the EZ form, borrowers have to make additional attestations to the federal government.

All borrowers must attest to this item to use the EZ form:

  • 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).

In addition, borrowers must confirm at least one of the two items below.

  • The 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 (other than any 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, and reductions in an employee’s hours that a borrower offered to restore and were refused).
  • The Borrower was unable to operate between February 15, 2020, and the end of 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 a borrower cannot make these attestations, they must use the full application form. Borrowers are allowed to attest to both items if they both apply to the borrower. Additional attestations are required that apply both to the long and EZ application form (e.g., that dollars were used for the allowed cost areas, understanding that submitting false information would result in penalty).