Small Business Administration New Guidelines and Streamlined Forgiveness Application

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On June 16, the Small Business Administration released an update on the PPP Loan Forgiveness Application (SBA Form 3508) and a simplified version for certain eligible borrowers (SBA Form 3508EZ), both reflecting the program changes implemented by the recently enacted Paycheck Protection Program Flexibility Act. In addition, the SBA and the Treasury continue to issue provisional final rules and guidance regarding the PPPFA, including a recent IFR which confirms that PPP loans remain eligible for partial forgiveness even if less than 60% of the proceeds are used for payroll expenses.

Notably, the change implemented by the PPPFA increases the loan amount that can be used for eligible non-salary expenses. Before the PPPFA, only 25% of the loan amount could be used for non-salary expenses. Now borrowers can spend up to 40% on non-salary charges, and as long as at least 60% of the loan proceeds are spent on salary charges, the entire loan can be forgiven. If less than 60% of the loan proceeds are spent on personnel costs, the remitted amount will be reduced accordingly.

According to application instructions For Form 3508EZ, borrowers can use the simplified two-page loan forgiveness request if they fall into one of the following three categories:

  • The borrower is a self-employed person, independent contractor or sole proprietor with no employees at the time of the PPP loan application.
  • The borrower did not reduce any employee’s salary by more than 25% and did not reduce the number of employees or the average number of paid hours of employees during the loan period.
  • The borrower did not reduce any employee’s salary by more than 25% and was unable to operate, or was operating at a lower level of business activity, during the loan period due to the sanitation compliance , social distancing, or any other COVID-19 related safety requirements or guidelines.

All other borrowers should use Form 3508, which has additional schedules and worksheets primarily to account for employee and salary reductions.1

As the SBA and Treasury continue to issue new guidance since the adoption of the PPPFA, several important questions remain unanswered. Significantly, although the loan period has been extended to 24 weeks, from 8 weeks under the original PPP legislation, the SBA has not clarified whether employers should calculate remittance amounts using the full 24 week period, even if loan funds are spent. in a shorter time. We expect that further directions from the SBA will be forthcoming to address these issues.

Bracewell’s interdisciplinary COVID-19 working group is actively helping many customers address the many and evolving issues they face, including potential access to stimulus programs. Your Bracewell point of contact can help you find out more.


1 Instructions for form 3508 can be found here.

© 2021 Bracewell LLPRevue nationale de droit, volume X, number 170

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