PPP Mortgage Functions Due by June 30, 2020
As mentioned in our June 4, 2020, Shopper Alert on the Paycheck Safety Program Flexibility Act of 2020 (PPPFA), the PPPFA amended a number of key provisions of the Paycheck Safety Program (PPP), however one merchandise that didn’t change is the applying deadline. This implies all PPP purposes are due by June 30, 2020. Functions should obtain a Small Enterprise Administration (SBA) mortgage quantity by June 30, 2020, and any candidates ought to work with their lender previous to this date to make sure submission of the applying.
New Forgiveness Functions
On June 16, 2020, the SBA launched revised types of the mortgage forgiveness utility and corresponding directions to mirror the PPPFA amendments. The up to date paperwork embody a revised commonplace forgiveness utility (Kind 3508), in addition to corresponding directions, and a brand new quick type “EZ” forgiveness utility (Kind 3508EZ), in addition to corresponding directions, which may solely be used if sure circumstances are glad.
The revised commonplace forgiveness utility consists of calculations associated to reductions of wage or full-time workers by debtors and the revised utility directions present particulars about these calculations. As anticipated, the important thing updates revolve across the calculation of the coated intervals, the complete time equal and wage/wage discount measurement intervals, and the 60/40 thresholds for payroll and non-payroll bills. An in depth breakdown of the modifications could be present in our revised FAQs (see beneath).
The EZ model of the forgiveness utility, which is simply three pages, might solely be utilized by debtors (1) who wouldn’t have workers; (2) who didn’t scale back salaries or hourly wages by greater than 25% throughout the coated interval and didn’t scale back workers between January 1, 2020 and the tip of the coated interval; or (3) who didn’t scale back salaries or hourly wages by greater than 25% throughout the coated interval and who have been unable to function throughout the coated interval on the similar degree of enterprise exercise as earlier than February 15, 2020, attributable to compliance with necessities established or steerage issued between March 1, 2020 and December 31, 2020 by the Secretary of Well being and Human Providers, the Director of the Facilities for Illness Management and Prevention, or the Occupational Security and Well being Administration, associated to the upkeep of requirements of sanitation, social distancing, or some other work or buyer security requirement associated to COVID-19. Every of those circumstances are defined additional within the directions for the EZ type. The EZ forgiveness utility is meant to simplify the forgiveness course of for debtors who’ve maintained their workers and salaries/wages throughout 2020.
Based mostly on the revised purposes and directions, debtors might apply for mortgage forgiveness as quickly because the coated interval expires (whether or not the borrower makes use of the 24-week coated interval or elects to make use of an eight-week coated interval) and their lender is ready to settle for forgiveness purposes. Debtors might not apply earlier than the tip of the relevant coated interval.
Debtors utilizing both forgiveness utility type shall be required to reveal the variety of workers on the time of the forgiveness utility. Additional, debtors shall be required to measure the complete time equal protected harbor as of the sooner of the date the forgiveness utility is submitted or December 31, 2020. Which means that to be eligible for this protected harbor, debtors might must maintain all full time equal workers employed even after the coated interval ends. We observe additional, that this protected harbor could also be irrelevant if the common full time equal workers throughout the coated interval is the same as or better than the common full time equal workers throughout the borrower’s chosen reference interval (both February 15 – June 30, 2019 or January 1 – February 29, 2020, except the borrower is a seasonal employer, through which case it could select both of these intervals or any consecutive 12-week interval between Could 1 – September 15, 2019).
We’ve additionally up to date our earlier FAQs on PPP Mortgage Forgiveness to mirror these modifications. You could find the brand new FAQs right here and a redline in opposition to the prior model right here.
The SBA has launched quite a lot of Interim Ultimate Guidelines for the reason that enactment of the PPPFA and, whereas most of contents of those guidelines are to replace modifications ensuing from the PPPFA, there are two materials revisions to remember.
The primary is the SBA confirmed it’s extending the maturity date for the portion of any PPP loans that aren’t forgiven to 5 years for all loans made on or after June 5, 2020, which is in step with the maturity date extension underneath the PPPFA. Nonetheless, the maturity date for all PPP loans made earlier than June 5, 2020, shall stay two years, “except the borrower and lender mutually agree to increase the maturity of such loans to 5 years . . ..” Which means, debtors who wouldn’t have all of their mortgage forgiven (or don’t count on to have all of it forgiven on the time of making use of), ought to ask their lender for an extension of the maturity date to as much as 5 years in the event that they want to benefit from the brand new laws.
The second is the utmost any “owner-employee” can have forgiven is both (i) eight weeks’ price (8/52) of 2019 web revenue (capped at $15,385) if the borrower elects to use the eight-week coated interval or (ii) 2.5 months’ price (2.5/12) of 2019 web revenue (capped at $20,833) if the borrower elects to use the 24-week coated interval. The definition of “owner-employee” consists of any self-employed particular person, a basic companion, owner-employee of an S-corporation, and, presumably, an owner-employee of a C-corporation.
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