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New PPP Loan Forgiveness Application

June 25th, 2020 | Written by

On Wednesday, June 16th, the SBA and Treasury released a revised Paycheck Protection Program application to reflect the program changes brought by the Paycheck Protection Program Flexibility Act.

There are two applications:

The new EZ Application

If you’re eligible, the EZ application requires fewer calculations and less documentation.

The new EZ version can be used by anyone who meets at least one of the following criteria:

  • You’re self-employed and have no employees
  • You have not reduced wages of your employees by more than 25% and did not reduce the number of hours for your employees
  • You have not reduced wages or your employees by more than 25% and you have experienced a slow down in your business as a result of COVID-19 health directives

If you’re considering using the EZ application, please refer to the instructions, linked above, prior to proceeding with the application to make sure you qualify.

Changes to the revised Loan Forgiveness Application

The new application reflects the changes brought on by the Flexibility Act including:

  • S-corporation owners cannot include health insurance when calculating payroll costs, however they can include retirement cost
  • Safe harbors for excluding wage reductions for employees (FTEs) can be applied as of the date the forgiveness application is submitted. Borrowers don’t have to wait until Dec. 31st to apply for forgiveness to use the safe harbors.
  • Borrowers who received loans prior to June 5th can choose the 8-week period, instead of the new 24-week covered period if they wish to do so
  • New 60% payroll requirement (previously at 75%)

Tips for submitting your application

In order to maximize your chances of forgiveness, you must meticulously track how you have spent your PPP funds for eligible payroll expenses and non-payroll expenses. We recommend you place your PPP funds in a separate account so you can track your spending more easily.  When in doubt, reach out to your financial advisor or your SBA lender to ensure you are using the funds correctly.

Create a PPP forgiveness file and keep records of:

  • Payroll
    • Payroll documents including bank statements and third-party payroll provider reports showing compensation paid to employees
    • Payroll tax forms, such as IRS Form 941, showing employee wages, tips, and other compensation
    • State quarterly tax forms
    • Documents showing employer contributions to health insurance and retirement plans
  • Business utility documents
    • Copies of invoices
    • Bank statements verifying utility payments
  • Rent documents
    • Copy of agreements
    • Bank statements showing the payments
  • Mortgage interest
    • Mortgage statements identifying the payee
    • Bank statements showing the payments
  • FTE Documents (If you have employees)
    • Payroll tax forms and state quarterly tax forms

We’re All In

Navigating the COVID-19 landscape can be tricky as a business owner. At Prosperity, we’re all in. We’re here to help you manage your PPP funds, help you with cash flow, and anything else during this unprecedented time. If you need us, you can leave us a note in the box below, email us at [email protected] or call us at (410) 363-7211.

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    This information is not intended to be used as the only bases for investment decisions, nor should it be constructed as advice designed to meet your particular needs. You are advised to seek the advice of your financial advisor prior to making any decision based on any specific information contained herein.
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