Key features of the new loan forgiveness application impacting non-profits include:
1. Safe harbors for excluding salary and hourly wage reductions and reductions in the number of employees (full-time equivalents) from loan forgiveness reductions can be applied as of the date the loan forgiveness application is submitted. Borrowers do not have have to wait until December 31st to apply for forgiveness to use the safe harbors.
2. Borrowers that received loans before June 5th can choose between using the original 8-week covered period or the new 24-week covered period.
3. The minimum term for PPP loans is increased to 5 years for all loans made on or after June 5th. For loans made before June 5th, the 2-year minimum maturity remains in effect unless both the borrower and the lender agree to extend it to 5 years.
4. The proportion of PPP funding that must be used on payroll costs to qualify for full forgiveness has been decreased to 60% from 75%.
5. The application deadline for PPP loans remains June 30.
In addition, with the Paycheck Protection Flexibility Act tripling the duration during which PPP recipients can spend the funds and still qualify for loan forgiveness — a span of time called the covered period, the SBA has now issued an interim final rule. The interim final rule adjusts and adds to previous guidance for calculating loan forgiveness under the original 8-week covered period. The PPP allows loan forgiveness for payroll costs — including salary, wages, and tips — for up to $100,000 annualized per employee, or $15,385 per individual over the 8-week period. The new interim final rule sets a 24-week maximum for full loan forgiveness at $46,154 per individual.
Lastly, a new EZ loan forgiveness application has been released along with instructions. Non-profits that did not cut employee FTE or wages or non-profits that can’t operate are eligible to complete the EZ application.
We would like to reiterate the theme of our previous blog post to take your time with loan forgiveness as there is ample time to complete the application, and there will be additional FAQ’s that may change how you approach completing the application.