Financial Advisory Blog

Armanino’s Financial Advisory blog is your source for thought leadership around cloud ERP and accounting solutions and integrations. Supported by the Cloud Accounting Institute and numerous experts in cloud, finance, reporting, integration, compliance, and technology, Armanino’s Financial Advisory blog features must-read content on what’s happening in the finance industry, case studies, white papers, and much more.

July 23, 2020

I’m confused as to whether I can use the new EZ application form. How do I know if I qualify?

Posted by Armanino Financial Advisory Team

A borrower qualifies to use the EZ form if any one of the three conditions below applies:

  1. The borrower is a self-employed individual, independent contractor, or sole proprietor who had no employees at the time of the PPP loan application and had no employee costs included in the calculation of their loan amount.
  2. The borrower has no employees who meet the Salary/Hourly Wage Reduction Factor requirement AND had no reductions in the number of their employees or the average paid hours of employees between January 1, 2020 and the end of the borrower’s Covered Period.
  3. The borrower has no employees who meet the Salary/Hourly Wage Reduction Factor requirement AND was unable to operate during the Covered Period at the same level of business activity as before February 15, 2020, due to compliance with requirements established or guidance issued between March 1, 2020 and December 31, 2020 by the Secretary of Health and Human Services, the Director of the Centers for Disease Control and Prevention, or the Occupational Safety and Health Administration, related to the maintenance of standards of sanitation, social distancing, or any other work or customer safety requirement related to COVID-19.

There are several important nuances to note in each of these:

  1. In the first criterion, the test essentially is no employees in 2019 and none at the time of loan application either. The loan at that point was one for owner replacement compensation only.
  2. The second criterion raises several interpretation questions that future guidance must clarify. The Salary Reduction test is clear. The second part of the test requires no reductions in employees or average paid hours since the beginning of the year. If an employee resigns and it takes the business four weeks to replace them, does that qualify as a “reduction” since it happened during the time period? If a single employee takes two hours of unpaid time to see a doctor, such that they were paid for only 38 hours that week, is that a “reduction” in average hours paid? What time period, specifically, is a borrower to compare the “average paid hours since January 1, 2020” against to know if there was a reduction?
  3. “The same level of business activity” in the third criterion is also undefined to date. What is clear is that the “inability to restore” business means the inability to recover from a reduction, not simply experiencing a reduction. It is also important to understand that “during the Covered Period” means throughout the period, not just reduced at a point in time. Also be aware that this test appears to be limited solely to requirements issued at the federal level, meaning restrictions placed on businesses at the city, county or state level will not meet this test unless those lower level restrictions relied in part (and in writing) on guidance issued by one or more of the three federal agencies.

The SBA has promised additional guidance that hopefully will clarify these important eligibility questions.

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