Paycheck Protection Program Update – Applying for Forgiveness
The big question many Paycheck Protection Program borrowers are asking is: when should I apply for forgiveness? The short answer is anytime within 10 months of the end of your “Covered Period.” But the longer answer is, subject to that 10-month deadline, you may want to wait to see if the government takes further action to simplify what is currently a complex and time-consuming process. Here are a few key points to keep in mind:
When to Appy for Foreignness.
- 10-Month Loan Deferral Period. Recall that your “Covered Period” is the 24-week period commencing on the date that you received your loan (unless you were an early borrower and opted for the 8-week period). Per the SBA’s frequently asked questions released August 11, 2020: “As long as a borrower submits its loan forgiveness application within ten months of the completion of the Covered Period, the borrower is not required to make any payments until the forgiveness amount is remitted to the lender by SBA. If the loan is fully forgiven, the borrower is not responsible for any payments. If only a portion of the loan is forgiven, or if the forgiveness application is denied, any remaining balance due on the loan must be repaid by the borrower on or before the maturity date of the loan. Interest accrues during the time between the disbursement of the loan and SBA remittance of the forgiveness amount. The borrower is responsible for paying the accrued interest on any amount of the loan that is not forgiven. The lender is responsible for notifying the borrower of remittance by SBA of the loan forgiveness amount (or that SBA determined that no amount of the loan is eligible for forgiveness) and the date on which the borrower’s first payment is due, if applicable.”
- Why You may want to Wait. According to multiple reports, there has been intense lobbying on Capitol Hill to simplify the forgiveness process, which can be complex and time consuming even for borrowers who are eligible to use the EZ Form (see below for current process). According to The Wall Street Journal, “lawmakers in both the House and the Senate introduced legislation to streamline forgiveness for PPP loans of less than $150,000, granting blanket forgiveness to borrowers with a simple attestation that the funds were used in accordance with the guidelines.” In addition, there are also reports that more PPP funds may be made available, including for existing PPP borrowers. It is possible these new loans may be rolled into existing PPP loans.
How to Apply for Forgiveness
The SBA has released two PPP loan forgiveness forms, an EZ Form and a Complete Form (see links and discussion below). That said, you should talk to your lender before filling-out any forms because many banks are using their own versions of these forms and they all have their own processing.
- EZ Form. To use the EZ Form, in general a borrower must meet one the following three criteria:
- The borrower is self-employed and has no employees; or
- The borrower did not reduce the salaries or wages of its employees by more than 25%, and did not reduce the number or hours of its employees; or
- The borrower 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%.
Here is the link to the EZ Form; please review the box at the top of page 1 for the detailed eligibility guidelines to determine if you are eligible to use the EZ Form.
- Complete Form. If you are not eligible to use the EZ Form, you must use the Complete Form at the link below. We would strongly encourage you to work with your accountant on completing this: Link to Complete Form
The attorneys at Gozdecki, Del Giudice, Americus, Farkas & Brocato LLP are available to answer your questions and help you navigate the maze of regulations, ordinances, and guidance.
Please note that information contained in this Client Bulletin is not and should not be construed as legal advice or opinion nor does this news alert create an attorney-client relationship.