On April 24, 2020, President Trump signed into law the Paycheck Protection Program and Health Care Enactment Act. The law provides an additional $484 billion for COVID-19 relief, focusing primarily on small businesses and health care. The law also expands eligibility for disaster loans to agricultural enterprises.
The SBA Paycheck Protection Program (PPP) is designed to provide a direct incentive for small businesses to keep their workers on the payroll during this unprecedented time.
PPP Loan Forgiveness & PPP Flexibility Act
The SBA, in consultation with the Department of the Treasury, released an interim final rule to reflect changes made by H.R. 7010, the Paycheck Protection Program Flexibility Act, which was signed into law by President Trump on June 5, 2020. Along with this interim final rule, a revised, borrower-friendly PPP loan forgiveness application was also released.
The key highlights of the PPP Flexibility Act are:
- Extended the covered period for loan forgiveness from eight weeks after the date of loan disbursement to 24 weeks after the date of loan disbursement, providing substantially greater flexibility for borrowers to qualify for loan forgiveness. Borrowers who have already received PPP loans retain the option to use an eight-week covered period.
- Lower the requirements that 75% of a borrower's 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 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, subject to at least 60% of the loan forgiveness amount having been used for payroll costs.
- Provide 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, due to compliance with requirements for guidance issued between March 1, 2020, and December 31, 2020, by the Secretary of Health and Human Services, the Director of the Centers for Disease Control and Prevention, or the Occupational Safety and Health Administration, related to worker or customer safety requirements related to COVID-19.
- Provide a safe harbor from 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.
- Increase to five years the maturity of PPP Loans that are approved by SBA (based on the date SBA assigns a loan number) on or after June 5, 2020, and provides an option for loans made prior to that date to extend maturity from two years to five years at the mutual agreement of the borrower and lender.
- Clarifies that if a borrower submits its forgiveness application within 10 months of the end of the loan forgiveness period, the borrower will not have to make any payments on the loan before the date SBA remits the forgiven amount to the lender.
- Confirms that June 30, 2020, will remain the last date on which a PPP loan application can be approved.
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, an independent contractor or a sole proprietor with 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 (excepting laid-off employees who refused an offer to return); 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. SBA also updated the regular Form 2508 to reflect recent changes mad by Congress in the PPP Flexibility Act and issued a new interim final rule that implements changes made by the PPPFA.
Read the Interim Final Rule
Loan Forgiveness EZ Application Guidelines
April 27, 2020 SBA PPP Funding Update from Our President
Any loan made under the SBA's Paycheck Protection Program must be submitted to and approved by the SBA. There is limited funding available and so all applications submitted will not be approved and funded by the SBA. Farmers State Bank is participating in the Paycheck Protection Program to help businesses impacted by the economic impact from COVID-19. However, Farmers State Bank anticipates high volume and there may be processing delays and system failures along with other issues that interfere with Farmers State Bank taking your application or submission of any application to SBA. Farmers State Bank does not represent or guarantee that it will take your application or submit any applications taken before SBA funding is no longer available or at all. By using Farmers State Bank to seek a Paycheck Protection Program loan, you agree that Farmers State Bank is not responsible or liable to you (i) if your application is not taken by Farmers State Bank or any application is not submitted to the SBA until after SBA stops approving applications, for any reason or (ii) if your inquiry or any application is not processed. You also forever release and waive any claims against Farmers State Bank concerning failure to obtain a loan. This release and waiver applies to but is not limited to any claims concerning Farmers State Bank's (i) pace, manner or systems for processing or prioritizing your inquiry or any resulting applications, or (ii) representations by Farmers State Bank regarding the application process, the Paycheck Protection Program, or availability of funds. Participation in the SBA Paycheck Protection Program is subject to confirmation and review of payroll and financial information. Farmers State Bank will not pay fees to or otherwise compensate anyone acting as an agent of the business for advising on or assisting in the preparation of the Paycheck Protection Program application or otherwise. This release and waiver supersedes any prior communication, understanding or agreement on the issues set forth herein.