As we reported in our previous alert, President Trump signed the Paycheck Protection Program Flexibility Act (“Flexibility Act”) into law. The bill makes numerous changes to the Paycheck Protection Program (“PPP”) aimed at improving loan forgiveness procedures and loosening restrictions on PPP funds. In accordance with the Flexibility Act, the Small Business Administration (“SBA”) and Department of the Treasury (“Treasury”) released revised application forms for businesses participating in the PPP. The new PPP application forms differ substantially from their previous iterations, and borrowers need to be aware of which forms they should use.
On June 12, 2020, the SBA released two applications for those interested in the PPP, one for potential borrowers and another for potential lenders. These forms establish eligibility for applicants who have a criminal history by reducing the look-back period to one year instead of five years for any non-financial felonies that resulted in a conviction, guilty pleading, pleading nolo contendere, or serving parole. The look-back period remains five years, however, for fraud, bribery, embezzlement, and submitting a false claim on a loan or federal financial assistance application.
On June 17, 2020, the SBA and Treasury jointly released two revised loan forgiveness forms for those already participating in the PPP. SBA Form 3508EZ is a simplified version of previous loan forgiveness forms that requires less documentation and calculations than the previous loan application. However, only three types of borrowers may use this form:
- the self-employed with no employees;
- those who “did not reduce the salaries or wages of their employees by more than 25%, and did not reduce the number of hours of their employees”; or
- those who “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%”.
All other loan forgiveness applicants must fill out SBA Form 3508. Regardless of the form, both give the option of using an eight-week covered period if the loan was made before June 5, 2020, or a 24-week covered period.
PilieroMazza is monitoring the rapidly changing COVID-19 crisis and will provide updates when more guidance is released by the government. We also invite you to visit the Firm’s COVID-19 Client Resource Center to access resources that will help businesses navigate the effects of the COVID-19 pandemic. If you need immediate assistance, please contact us at [email protected].