Chris Nichols (00:00):
Welcome PPP borrowers. These are quick PPP Forgiveness video series designed to explore a single topic
and to get you educated in preparation for completing your PPP Forgiveness application. With me, we
have Josh Harris, from CentralState Bank in charge of credit and processing for PPP Forgiveness. And
then we have John Carpenter from Cherry Bekaert, a CPA firm on board. John, Josh, thanks you guys for
being here. Let's talk about the EZ Form. Josh, do you want to talk about maybe when borrowers should
use the EZ Form?
Josh Harris (00:46):
Certainly Chris. So, I guess the first thing that folks need to understand is that there are two forms. The
basic 3508, which is a first form that was rolled out. And then the 3508 EZ form, which as the name
indicates is an easier form to fill out. It's been abbreviated. It's a little bit shorter and just been
streamlined to make it a little bit less burdened on the borrowers.
Josh Harris (01:14):
So, for those of our folks who qualify, and that's one thing that John is going to address for us in more
detail, but for those who meet the criteria for the EZ form, they'll benefit from just an expedited
abbreviated form. It's going to help save them some time and energy. It's going to require kind of a little
less documentation. For example, they don't need to provide schedule A or the schedule A worksheet. A
little bit less calculation involved, a little bit less documentation involved. So all that to say, it's going to
be a simpler application process. That being said there is still work involved. So, I don't want to set the
expectation falsely. All of us, including these forgiveness applicants, there's work involved regardless of
which form they fill out. But this EZ Form, if they qualify, is definitely the one that they are going to want
to use.
Josh Harris (02:07):
So, I believe John is going to kind of walk us through the which criteria they have to meet in order to
qualify for this form.
Chris Nichols (02:17):
John, do you want to talk about how to qualify or [inaudible 00:02:18] should use EZ form?
John Carpenter (02:21):
Yeah, Chris, thank you very much. And quite simply, to use the EZ Form, borrowers need to be able to
represent one of three conditions being in place. The first one, which is probably the easiest one for
those who qualify is that if a borrower is a self employed individual, an independent contractor, or a sole
proprietor who had no employees when they applied for PPP and is not including any employee salaries
in the computation of average monthly payroll, then bingo, you qualify for EZ. So, that's probably the
easiest of the three to understand. The second one, second condition, which would qualify borrowers
for the EZ form is borrowers who have to meet two tests.
John Carpenter (03:16):
Test number one, if the borrower can represent that they have not reduced any annual salaries or
hourly wages of any employee by more than 25% during their forgiveness period, compared to where
they were in the first quarter of this year. And this only applies to employees whose annualized rate ofpay is 100,000 or less. So, if they meet that test and I'll stress here, that it's annual salary rate or hourly
wage rates. This does not speak to, did you reduce employee hours? Did you reduce employee wage
rates? Generally, that's an easier test to meet. So that's number one, if you did not reduce the salary
rate or the hourly wage rate by more than 25% and then test number two, that's part of number two is
that if the borrower did not reduce the number of employees or the average paid hours of the
employees between January 1 and the end of the forgiveness period, then they meet that test.
John Carpenter (04:31):
Borrowers should take a look. There are a couple of safe harbors built in there. For example, if you had
employees who resigned, then that's not considered a reduction in number of employees. If you had an
employee that... Or if you made some reductions, but you were unable to rehire employees that were
similarly qualified for unfilled positions, you don't have to count those against you. So, there are a few
exceptions in there that borrowers should pay close attention to.
John Carpenter (05:04):
And then the third way that you can qualify for EZ is to meet the two tests outlined here in number
three. First test, same as what we just talked about in number two. Did you not reduce salary levels or
wage rates of any employee by more than 25%? And then second condition there is if the business has
been unable to operate during the forgiveness period at the same level of business activity as before
February 15th, due to compliance with specific health and safety requirements outlined, and this is
outlined in the flexibility act, but in a little more detail.
John Carpenter (05:44):
What they're saying is if you've had to follow the guidance of either Health and Human Services, the
Center for Disease Control or OSHA related to the maintenance of standards of sanitation, social
distancing, or any other work or customer safety requirements related to COVID and your business
activity level has not returned to where it was as of February 15th, then you qualify. Now, a couple of
these... There are many we don't have enough time to give all the possible examples here, but just in
general, here's a couple examples for borrowers to think about. Think about restaurants. Almost
everywhere in the U.S., restaurants have had protracted periods of shut down or partial shut down,
have been unable to bring customers back into the restaurant in the same way as they did prior to
February 15th. And so, although not universally, but almost universally, I think we could say every
restaurant can make that certification in number three. Contrast that with a business like an engineering
firm or an accounting firm.
John Carpenter (07:01):
Now, a lot of businesses may say, "Well, my business is down because I've been impacted by COVID."
But more specifically, is your business down because you've got other customers who, because of
budget problems related to COVID are canceling jobs or postponing jobs, or decreasing their orders from
you? That's different than you saying, "Well, I've been impacted by COVID because of regulatory rules
and public safety rules that don't allow my employees and my customers to come into my facility
because of social distancing requirements." So, I think, our word of caution to borrowers is you can't
quite say, "Oh, I've been impacted by COVID. Therefore, I'm going to check box number three." It's a
little more specific than that. Are you checking box number three because public safety requirements
are keeping your employees and customers physically away from or partially away from your facility, oris it just because your customers, because of the overall economic issues and COVID issues that they're
delaying canceling or deferring revenue?
John Carpenter (08:20):
So a couple thoughts there and borrowers, I think just need to be careful not to check box number
three, thinking, "Well, I've been impacted by COVID." And that's a blanket statement. It's not quite as
blanket as that.
Chris Nichols (08:34):
Excellent. And as we wrap up, Josh or John, any advice on how to document that, the number three part
for filing with the bank?
John Carpenter (08:45):
Yeah, I think for most businesses it's again, I think if you're say a restaurant, then it's probably pretty
easy. You can put some document in the file that says that, "Hey, on this date the CDC issued these
orders and our local or state public health department issued certain orders." Beyond probably the
pretty obvious restaurant example. I think it really comes down to borrowers putting some sort of a
brief document in their file that may just be a brief narrative or a statement outlining how they believe
they comply with this and I think they should document something around what sort of orders issued by
state or local public health authorities.
John Carpenter (09:32):
How has that impacted their business? How has that caused either their employees or customers to be
fully or partially unable to reach them?
Chris Nichols (09:45):
So, either a narrative and or some copy of a website or order that's issued by your County government,
for example, would be sufficient?
John Carpenter (09:55):
We think it should be. Now, SBA has not really put out anything very specific on what this
documentation needs to look like so we're all in this together in terms of trying to give the best advice
we can without any real clear guidance from SBA. But, I think we feel like that what you just described is
a reasonable way to approach it.
Chris Nichols (10:20):
Excellent. Josh, John, I appreciate it. We appreciate it on behalf of all the borrowers of PPP and those
going for forgiveness. We'll wrap this up. So, stay tuned and thank you guys very much. Take care.
Josh Harris (10:48):
All right, thanks Chris.
John Carpenter (10:48):
Thank you.