Last month, small business owners who successfully received the Paycheck Protection Program (PPP) loan began to apply for loan forgiveness. To make the forgiveness application process easier for borrowers, the Small Business Administration (SBA), in consultation with the Treasury, released on June 17th, a revised loan forgiveness application. This new version includes an EZ application that requires fewer documents and fewer calculations than the Revised Full Forgiveness Application (FFA). In this article, we’d like to introduce the newly released EZ application and give some tips on how to complete it to the PPP loan borrowers.
Criteria for Using EZ Application Form
When requesting PPP loan forgiveness, there are two application forms that borrowers need to complete and submit. Those are the 3508 and the new 3508EZ application forms. However, the eligibility to use Form 3508EZ is limited. To be qualified to use the EZ form, borrowers must meet one of the following criteria:
- The borrower should be self-employed and do not have any employees.
- Did not reduce the employees’ hours or did not reduce their salaries or wages by more than 25%.
- Experienced reduction in business activity as a result of health directives related to COVID-19 and did not reduce employees’ salaries or wages by more than 25%.
Difference Between EZ and Revised FFA
- Payroll costs
- Business mortgage interest payments
- Business rents or lease payments
- Business utility payments
For borrowers who can complete the EZ form, the potential forgiveness amount should be the total amount of the four numbers we just mentioned, the PPP loan amount, and the payroll cost 60% requirement. The forgiveness amount will be the smallest of the potential forgiveness amount.
For borrowers who need to fill the Revised FFA form, they need to calculate the adjustments for Full-Time Equivalent (FTE) and Salary/Hourly Wage Reductions. The potential forgiveness amount contains the modified total, which should be calculated according to the FTE and wage reduction adjustments. And it also includes a PPP loan amount, and the payroll cost 60% requirement. The forgiveness amount is still the smallest of the three potential ones.
Tips for Completing the EZ Form
Before starting to fill in the EZ form, small business owners must determine whether they are qualified. We recommend borrowers to read the EZ form instructions. On the first page, there is a checklist for the qualification. If the business owner can check one of the checkboxes in this checklist, the company will be able to use the EZ form for loan forgiveness applications.
The next step is to do all the calculations. Borrowers should read the second part of the instruction carefully to understand what they should calculate and how to calculate them.
Then business owners should provide certifications to support their calculation. For example, they need to provide documents to prove that the annual salaries or hourly wages were not reduced by more than 25%. The last part of the instruction is about documents that each borrower must maintain. Business owners can use this as a reference to prepare all the necessary documents.