The SBA has now released its revised loan forgiveness forms as well as updated guidance on the PPP Flexibility Act. We will be releasing a fully updated guidance on completing these revised forms in the near future.
The most important items from these new forms and guidance include the following:
1. There is a shortened form call the EZ PPP Loan Forgiveness Application that will be available for many small businesses and for all self-employed applicants without payroll expenses. This shortened form will allow for a simpler loan forgiveness application with fewer documents required and fewer calculations.
2. The forgiveness for self-employed applicants and S-Corp shareholders has been increased to $20,833 or 2.5 months of 2019 income (whichever is smaller). This allows a self-employed applicant to receive a full forgiveness just based on the self-employment that was claimed in the original applications!
3. For all other employees, the limit has been increased from $15,385 to a maximum of $46,154, this should help a lot of businesses meet their reduced 60% threshold.
4. S-Corp owners are NOT permitted to use their health insurance as a payroll cost under the new guidelines. This is an unfavorable change from the previous guidance. However, the increase from $15,385 to $20,833 should reduce the importance of this deduction.
The EIDL has reopened to all small businesses. The new application is fairly straightforward and can be accessed at https://covid19relief.sba.gov/#/ . The terms and conditions of the advance have changed somewhat. The advance is limited to a cap of $10,000 with a further limit of $1,000 per employee. Additionally, the advance will reduce forgiveness for an existing PPP loan.
The actual EIDL loan is subject to many conditions which should be reviewed carefully before determining if this loan is useful for your business. Primarily, the business needs to be able to use the funds in its ordinary course of business and may be subjected to onerous reporting requirements, including annual audited financial statements. We hope these conditions will be eased with further guidance and recommend applying if you feel you can use these funds as you can always cancel the application or return the funds at a later date.