Under the Paycheck Protection Program (PPP) created by the CARES Act, loans may be forgiven if borrowers use the proceeds to maintain their payrolls and pay other specified expenses. PPP borrowers must apply for loan forgiveness with the lender that processed the loan.
If our Mascoma Bank team helped originate your PPP loan, we strongly encourage you to make yourself aware of the specific information you will need to track in order to apply for forgiveness.
The Small Business Administration has made some important changes to the PPP forgiveness program. There are several changes, two of which include:
- Giving the borrower the option of using the original 8-week covered period (if their loan was made before June 5, 2020), or extending the covered period for loan forgiveness to 24 weeks, which provides greater flexibility for borrowers to qualify for loan forgiveness.
- Lowering the requirements from 75% to 60% of a borrower’s loan proceeds that must be used for payroll costs during the 24-week loan forgiveness period. If a borrower uses less than 60% of the loan amount for payroll cost during the forgiveness period, the borrower may be eligible for partial loan forgiveness.
Two Versions of the Forgiveness Application
The U.S. Small Business Administration, in consultation with the Department of the Treasury, has posted a revised, borrower-friendly Paycheck Protection Program (PPP) loan forgiveness application implementing the PPP Flexibility Act of 2020, signed into law on June 5, 2020. In addition to revising the full forgiveness application, SBA also published a new EZ version of the forgiveness application that applies to borrowers that:
- Are self-employed and have no employees; OR
- Did not reduce the salaries or wages of their employees by more than 25%, and did not reduce the number or hours of their employees; OR
- 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%.
The EZ application requires fewer calculations and less documentation for eligible borrowers. Details regarding the applicability of these provisions are available in the instructions to the new EZ application form.
Both applications give borrowers the option of using the original 8-week covered period (if their loan was made before June 5, 2020) or an extended 24-week covered period. These changes will result in a more efficient process and make it easier for businesses to realize full forgiveness of their PPP loan.
In most cases, we anticipate that a company bookkeeper or an accounting professional will need to assist you in completing the forgiveness application, and we recommend you consult with that person in regard to any calculation questions.
If you have questions about the PPP program itself or your general understanding of the procedures, please contact your state SBA office or Submit Your Question through our loan portal. We will do our best to answer your questions based on the guidance we have received to date.