More Updates on the PPP, Including New Borrower-Friendly Forgiveness Applications

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Guidance on the federal Paycheck Protection Program (“PPP”) continues to change at a fast pace. In the last week, the Small Business Administration (“SBA”) has released revised guidance on implementing the Paycheck Protection Program Flexibility Act (“PPPFA”), loan forgiveness applications, and eligibility for loans.

PPPFA Guidance

The SBA’s Interim Final Rule published on June 19, 2020 implements the terms of the PPPFA, which we discussed in detail as the subject of our PPP Flexibility Act Legal Alert on June 4, 2020. The guidance offered three noteworthy points of clarification:

  1. Under the new “60% percent” loan forgiveness requirement, a borrower will remain eligible for partial forgiveness if they do not spend at least 60% of the loan funds on payroll costs;
  2. Self-employed individuals with no employees may qualify for PPP loan forgiveness under new owner-compensation rules; and
  3. June 30, 2020 remains the last day which PPP loan applications can be approved.

Loan Forgiveness Applications

On June 17, the SBA released two new loan forgiveness applications. The Full Forgiveness Application is a much shorter, borrower-friendly application which accounts for changes made by the PPPFA. The even more simple EZ Forgiveness Application requires less calculations and documentation and offers a streamlined process for certain eligible borrowers that:

  • Are self-employed and have no employees; or
  • Did not reduce the number of employees and did not reduce employee compensation by more than 25%; or
  • Experienced a drop in business activity because of health directives related to COVID-19 and did not reduce employee compensation by more than 25%.

Loan Eligibility Guidance

The Final Interim Rule release on June 12, 2019 changes the eligibility threshold for those with felony criminal histories that do not involve fraud, bribery, embezzlement, or a false statement in a loan application. For these categories only, the look-back period has been reduced from 5 years to 1 year.

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