Join us for a Lunch & Learn with Raymond L. Graves from the SBA. He will lead a discussion give updates and programs details for businesses.
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Meeting ID: 846 0322 3381
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Congress overwhelmingly approved significant changes to the Paycheck Protection Program (PPP). Outlined below are the major changes that may impact you and your business through the covered period and loan forgiveness application. If signed, we expect the Small Business Administration (SBA) to provide additional guidance.
Congress made substantial changes to the forgiveness rules, most importantly:
Covered period: The new rules extend the covered period from the current 8 weeks to 24 weeks. The covered period is the time in which businesses may incur or pay expenses to be considered for forgiveness, beginning on the date of loan origination. Borrowers may elect to use either an 8-week or 24-week covered period.
Percent of forgiveness attributed to payroll expenses: Under the new rules, 60 percent of the forgiveness amount must be for eligible payroll costs, including cash compensation, employer contributions to health plans and retirement and owner compensation. The effect of this change is that a greater amount of non-payroll costs, such as utilities, rent and mortgage interest, will be eligible for forgiveness.
Extending deferrals: The legislation delayed when borrowers must make repayments on their loans. Loan deferrals are extended to the point U.S. Bank receives the SBA’s decision on a borrower’s application for loan forgiveness, which could be as long as 150 days under the current guidelines. Businesses that do not submit an application for loan forgiveness within 10 months of the last day of the covered period must begin making payments at that time.
Rehire deadline: Under the new rules, businesses have until December 31, 2020 to restore full-time equivalent (FTE) employee levels to pre-COVID levels to qualify for full forgiveness. Businesses who are not able to rehire the same or similarly qualified employees, with good faith documentation, may not face reductions in their forgiveness amount.
Exemptions for COVID closures: Businesses that were unable to return to pre-COVID levels of activity due to compliance with certain COVID-related orders will also not be subject to reductions in their forgiveness amount, as long as they can provide good faith documentation.
Payroll tax deferral: Recipients of PPP loans may defer payment of federal payroll taxes.
What does it mean for me?
For most businesses, the new rules will expand the amount of their PPP loan eligible for forgiveness. Please review what the changes mean for you and when to begin the forgiveness application process with your legal counsel or accountant.
Notwithstanding what your loan agreement says, we will follow the SBA’s loan forgiveness rules that are in effect at the time you submit your application, which may include the new rules discussed above. There is no action required at this time.
You can refer to the SBA¹ and the U.S. Treasury Paycheck Protection Programwebsites for specific guidance regarding loan forgiveness and additional explanation on the program.