Full PPP Loan Forgiveness for the Self-Employed!

Question of the Week

If you’re a freelancer or other self-employed person wondering if you’ll get forgiveness for loans taken out under the Paycheck Protection Program (PPP), the SBA has some good news for you. The SBA filed its 19th  Interim Final Rule (IFR), on Friday June 19th, focusing on revisions made from Paycheck Protection Program Flexibility Act (Flexibility Act) signed into law on June 5th.  The provisions ensure full forgiveness for self-employed, freelancers and independent contractors who took the maximum loan amount based on 2.5 times their 2019 monthly income. Here’s what you need to know.

Changes made by the Flexibility Act

The Flexibility Act made a few key changes to the PPP Program:

  • For loans made after June 5th, it extended the maturity date of the loan from two years to five years.  The maturity date can also be extended for loans made before June 5th, if the borrower and lender mutually agree.
  • The covered period for the loan forgiveness was extended from eight weeks to 24 weeks. However, borrowers with loans taken before June 5th can still choose the eight-week period.
  • The Act reduced the amount that you needed to spend on payroll in order to obtain forgiveness from 75% to 60%.  Originally, the Act made it sound like if you didn’t get to 60% in payroll expenses, you didn’t get any forgiveness. However, the SBA and Treasury later clarified even if you didn’t get to 60% in payroll expenses you could still obtain partial forgiveness.
  • The Act extended the date to replace full-time equivalent employees (FTEs) and restore salaries from June 30, 2020 until December 31, 2020.  It also allowed relief for those businesses that have a loss of FTEs because of Covid-19 related restrictions that prevent the same level of business activity through the end of the year. This is a significant help to those businesses who still have not been able to fully reopen because of stay-at-home restrictions.

All of these adjustments were welcome and exciting news. But the SBA didn’t specify how they would work until the newest IFR. It also gave additional insight on how to calculate owner compensation, employee compensation and non-payroll costs.

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Quote of the Week

“Forgiveness says you are given another chance to make a new beginning.” – Desmond Tutu


Task of the Week

With full loan forgiveness upon us, take a moment to review the new Form 3508EZ and the associated instructions. This will help familiarize you with what information and documents you will need for forgiveness.

And if you haven’t applied for PPP yet, you have until June 30th to do apply. So get on it!