SBA Releases New EZ PPP Loan Forgiveness Application

Yesterday, the U.S. Small Business Administration (SBA) made it easier to apply for forgiveness of your Paycheck Protection Program (PPP) loan.  

New EZ Application and Revisions To The Full Forgiveness Application

The SBA, in consultation with the Department of the Treasury, announced a brand-new Form 3508EZ for certain PPP borrowers to use to apply for forgiveness. The SBA also made borrower-friendly revisions to the full forgiveness application. These changes are intended to make the application process easier on borrowers and to increase efficiency for lenders and borrowers alike. 

New EZ Forgiveness Application

The new EZ application (two pages), which you would want to use if you are eligible, requires fewer calculations and less documentation than the revised full forgiveness application (FFA), which is four pages.

Eligibility To Use Form EZ Is Limited

To be eligible use Form EZ, PPP borrowers must meet the following criteria, quoting from yesterday’s SBA press release:

• “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%.”

Warning

To determine whether the EZ is the way to go, you’ll need to see if you qualify.  

My advice: Focus on page 1 of the instructions to the EZ. You’ll find a checklist with three checkboxes. If you can check one of those boxes, you can use Form EZ. For example, the first box is for a self-employed individual with no employees.    

Then, read page 2 of Form EZ itself, which contains certifications (these are also in the checklist).     

Can you certify to this statement?

“The Borrower did not reduce salaries or hourly wages by more than 25 percent for any employee during the Covered Period or Alternative Payroll Covered Period compared to the period between January 1, 2020 and March 31, 2020. For purposes of this certification, the term ‘employee’ includes 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.”

If so, can you also certify to either of the following two statements? You’ll find them at the bottom of page 2 of the EZ: 

“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).”

OR 

“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 you are not able to certify to these statements, you would 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 use the Revised Full Forgiveness Application.

The EZ application asks for the following information (the numbers refer to “lines” in the application): 

1. Payroll costs
2. Business mortgage interest payments
3. Business rent or lease payments 
4. Business utility payments
5. Add lines 1, 2, 3 and 4 to arrive at the potential forgiveness amount 
6. Loan amount
7. Payroll cost 60% requirement (divide line 1 by 0.6)
8. Forgiveness 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 that draw information from PPP Schedule A (page 4) to the form to account for adjustments for Full-Time Equivalency (FTE) and Salary/Hourly Wage Reductions.

There is no equivalent Schedule A for EZ. 

That brings the line count to eleven instead of eight for EZ. 

Help! 

I should mention that help filling out these applications is available. I would turn to my payroll provider first.

Some payroll vendors (Paychex, for example) offer online estimators that can help you get a handle on the process before you fill out an EZ or FFA. Paychex’s interactive PPP Loan Forgiveness Estimator is quite impressive. 

For example, it helps take you through the data that you would need for Schedule A, explains full-time employee reduction adjustments and helps calculate average full-time equivalents. It’s worth a try. 

More to Come 

The subject of forgivable PPP loans is still evolving. The two applications will make the loan forgiveness process easier for business owners—and that’s good news.

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