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COVID-19 Relief Law - PPP Forgiveness Guidance Issued


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7/13/2020
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Payroll Protection Program History and Amendments
 
For most small businesses, loan forgiveness is the most attractive aspect of the Paycheck Protection Program ("PPP"). The following comprehensive write up is intended to serve on a crash course for the PPP forgiveness. However, we strongly recommend any recipients seek legal counsel before navigating this crucial aspect of the loans.
 
On June 4, 2020, the Paycheck Protection Program Flexibility Act (the "Act") was signed into law. The Act substantially increased flexibility for loan forgiveness. The PPP period was extended from 8 weeks to 24 weeks after the date of loan disbursement. The forgiveness amount is equal to the sum of the following costs incurred during that period: payroll costs; mortgage interest; rent obligations; and utility payments.
 
Under the Act, the requirements that 75% of loan proceeds must be used for payroll costs and that 75% of the loan forgiveness amount must have been spent on payroll costs during the 24-week loan forgiveness covered period was lowered to 60% for each of these requirements. If a borrower uses less than 60% of the loan amount for payroll costs during the forgiveness covered period, the borrower will continue to be eligible for partial loan forgiveness.
 
The Act established a safe harbor from reductions in loan forgiveness based on reductions in full-time equivalent employees for borrowers that are unable to return to the same level of business activity the business was operating at before February 15, 2020. Additionally, a safe harbor was established for reductions in loan forgiveness based on reductions in full-time equivalent employees, to provide protections for borrowers that are both unable to rehire individuals who were employees of the borrower on February 15, 2020, and unable to hire similarly qualified employees for unfilled positions by December 31, 2020.
 
Payroll Protection Program Forgiveness
 
In light of the changes implemented under the PPP Flexibility Act, the SBA published a revised loan forgiveness application on June 17, 2020. In addition to revising the Full Forgiveness Application, SBA also published a new EZ Forgiveness Application
 
The EZ application requires fewer calculations and less documentation for eligible borrowers. The simplified version of the application is available to loan recipients that satisfy the following requirements:
  • 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 of 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 instructions for the loan forgiveness applications specify what documents must be submitted to the lender in connection with the application, including documentation verifying the eligible cash compensation and non-cash benefit payments from the Covered Period or the Alternative Payroll Covered Period and documentation verifying existence of the obligations/services prior to February 15, 2020 and eligible payments from the Covered Period. 
 
After submission of a completed loan forgiveness application, the lender has 60 days to review the application and submit its decision to the SBA. If the lender denies forgiveness, borrowers may request that the SBA review a lender’s decision denying forgiveness within 30 days of receiving the denial notice from the lender. The SBA may decline or accept the request for review. The SBA has indicated that it plans to issue further guidance regarding the appeal process.
 
The CARES Act contains multiple means of relief for businesses and self-employed individuals.  We understand how uncertain this time and our firm is prepared to advise you on which program is best suited for your financial situation as well as assist you in the application process for the two programs, Fazzio Law is in your corner.


Category: COVID-19 Relief Law


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