Tonkon Torp Explains PPP EZ Forgiveness Application and New Guidance

On June 30, attorneys from Tonkon Torp’s Business Department hosted a webinar to share information on the Paycheck Protection Program (PPP) EZ Forgiveness Application and other new guidance on the PPP. The program was moderated by Partner Drea Schmidt and featured attorneys Betsy Judd and Ferdie Ruplin.

PPP borrowers can begin to prepare for loan forgiveness with more confidence about their strategy now that the SBA has released a simplified EZ Forgiveness Application, an updated long-form forgiveness application, and much needed answers to key questions about repayment and forgiveness. Betsy explained the key differences between the two forgiveness applications, defined the three categories of borrowers eligible to use the EZ Application, and gave examples of factors that could exclude borrowers from using the EZ Application. She also compared the caps on forgivable cash compensation for owners and employees for an 8 week versus a 24 week covered period.

The SBA has clarified that borrowers can apply for forgiveness as soon as they spend 100% of their loan proceeds rather than waiting until their covered period ends. This is good news for borrowers that want to get their PPP loan off the books, but raises questions for those that rely on safe harbors for salary or FTE reductions to avoid reduction in forgiveness. Ferdie looked at the three safe harbors that borrowers can use to avoid a reduction in forgiveness based on FTE headcount, and walked through several scenarios about when to apply for forgiveness. Ferdie also gave an overview of how salary reductions are calculated in the loan forgiveness application and strategies for limiting such reductions.

During a Q&A with participants, Drea, Betsy and Ferdie provided further insight into the pros and cons of using the 8 or 24 week covered period, timelines for restoring furloughed employees, using the EZ Application, forgiveness calculations, exemptions for COVID-reduced business activity, and the mechanics of the forgiveness application process.

The Business Department is hosting a series of webinars to guide borrowers through the evolving PPP loan program. A recording of this webinar and an FAQ answering common questions on the EZ Application and new guidance is now available online. Viewers are encouraged to follow up directly with attorneys to ask questions not addressed during the program or in the FAQ. Tonkon Torp has published a COVID-19 Resource digest that is continually refreshed with news, alerts and events that address a broad range of corporate topics.

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