Ice Miller LLP: Insights

PPP Loan Forgiveness: SBA Releases Revised Application and “EZ” Application

On June 16, 2020, the Small Business Administration (“SBA”) released new documents related to forgiveness of Paycheck Protection Program (“PPP”) loans: (1) a revised PPP loan forgiveness application and Instructions and (2) an “EZ” version of the PPP loan forgiveness application and the EZ Instructions. Both applications give borrowers the option of using the original 8-week covered period (for loans made before June 5, 2020) or an extended 24-week covered period.

This article focuses on the limited changes made to the Forgiveness Application and the EZ Forgiveness Application made necessary by Congress’s adoption of the Paycheck Protection Program Flexibility Act of 2020 and the SBA’s corresponding revisions to its First Interim Final Rule to the PPP. For further information on those changes, please see our summary of the Flexibility Act and our summary of changes to the Interim Final Rule.

Revised PPP Loan Forgiveness Application

The revised PPP forgiveness application further clarifies several issues covered by the Flexibility Act, including:

Owner Compensation
- The revised application clarifies how owner compensation is to be calculated. Owner compensation is either:
  - 2.5 months’ worth (2.5/12) of 2019 net profit (up to $20,833) for a 24-week covered period.
  - 8 weeks’ worth (8/52) of 2019 net profit (up to $15,285) for an 8-week covered period, or
Employee Compensation
- The 24-week extension also increased the amount eligible for forgiveness to business owners with employees. Previously, payroll costs for each individual were capped at $15,385. Now, payroll costs for individuals are capped at $46,154 (or $100,000/52 * 24 weeks).
- For owner-employees or self-employed borrowers, a single individual can be paid 2.5 months’ worth of their 2019 compensation in a 24-week covered period. However, there is still uncertainty regarding how a borrower, who was not an owner in 2019 (or only a portion of 2019), is to calculate this amount.
Non-Payroll Expenses
- The loan forgiveness amounts for non-payroll expenses have also been extended to 24 weeks (incurred or paid).

“EZ” PPP Loan Forgiveness Application

The purpose of the EZ version of the PPP loan forgiveness application is to streamline the forgiveness application process for certain borrowers; it requires fewer calculations and less documentation for eligible borrowers.

The EZ application is available to the following borrowers:

Those who are self-employed or have no employees;
Those who 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
Those who 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%.

Like the standard PPP loan forgives application, the EZ application also requires information about each of borrower’s principals. “Principals” include:

For those who are self-employed, independent contractors, or sole proprietors, or the self-employed individual, independent contractor, or sole proprietor;
A partnership, general partnership, and limited partnership owning 20% or more of the equity of the borrower, or any partner that is involved in the management of the borrower’s business;
A corporation, all owners of 20% or more of the borrower, and each officer and director;
Members of a limited liability company owning more than 20% or more of the borrower, and each officer and director;
Any individual hired by the borrower to manage day-to-day operations of the borrower (referred to as a “key employee”);
If borrower is owned by a trust, any trustor; and
If borrower is a non-profit organization, the officers and directors of the borrower.

If you would like further information or to discuss this guidance, please contact Greg Gorospe or Josh Christie of Ice Miller’s COVID-19 Task Force.

Please contact our COVID-19 Task Force if you have any questions about managing the risks of the coronavirus pandemic. Our Task Force leadership consists of partners Josh Christie, Tami Earnhart and Christina Fugate. Also see our Coronavirus (COVID-19) Resource Center for additional resources, which is updated daily.

This publication is intended for general information purposes only and does not and is not intended to constitute legal advice. It speaks only to guidance available as of May 13, 2020. The reader should consult with legal counsel to determine how laws or decisions discussed herein apply to the reader’s specific circumstances.