On June 16, 2020, the Small Business Administration ("SBA") issued revised interim rules, as well as the PPP loan forgiveness application (SBA Form 3508) and provided a new simplified loan forgiveness application (SBA Form 3508EZ), all of which incorporate the provisions of the Flexibility Act. The new simplified loan forgiveness application (SBA Form 3508EZ) is available for use by borrowers who are self-employed and did not list any employees on their original loan application; or, for borrowers who have employees but are not subject to any loan forgiveness reduction due to salary or full-time equivalent employee reductions.
Highlights of key provisions of the Flexibility Act:
- Current PPP borrowers can choose to extend the loan forgiveness covered period from 8 weeks (56 days) to 24 weeks (168 days) from the loan origination date, as long as the covered period does not extend beyond December 31, 2020, or they can keep the original 8-week window. New PPP borrowers will have a 24-week covered period, as long as the covered period does not extend beyond December 31, 2020.
- Reduces the required amount for payroll expenditure from 75% to 60%.
- Provides two "new" exceptions allowing PPP borrowers to achieve full loan forgiveness even if they are unable to restore their workforce.
- New PPP borrowers now have a five-year rather than a two-year maturity date for all loans made on or after the bill’s date of enactment. For loans made prior to that date, both the lender and the borrower must mutually agree to modification of the maturity date term to five years. Regardless of the maturity term, the interest rate will remain at 1%. (PPP loan borrowers should obtain documentation from their lender if the maturity date is changed and the PPP loan is extended to a five-year term.)
- Allows businesses to qualify for the employer payroll tax deferral provided in the CARES Act even if they have received PPP loan forgiveness.
CAMICO recommends that firms visit the Small Business Administration ("SBA") website for the latest guidance, resources, and access to the PPP loan forgiveness applications and instructions at https://www.sba.gov/funding-programs/loans/coronavirus-relief-options/paycheck-protection-program.
CAMICO encourages firms who are assisting clients with PPP loan forgiveness to have an engagement letter in place that outlines the scope and limitations of the services being provided, as well as the client’s responsibilities under the terms of the engagement. CAMICO has developed the following two engagement letter templates for this purpose:
- Consulting Services: Assistance with PPP Loan Forgiveness
- Agreed-Upon Procedures: PPP Loan Forgiveness Calculations