A Change for the Better: What You Need to Know About PPP Loan Forgiveness
It’s now easier to get your PPP loan forgiven
If you received a Payment Protection Program (PPP) loan to help your company deal with the financial fallout of the Coronavirus crisis, you may be approaching an important loan forgiveness deadline.
Changes in the timing of deadlines to apply for forgiveness were passed in a secondary measure, the Paycheck Protection Flexibility Act, signed into law on June 5, 2020. This law adjusted some of the terms of the original legislation and delivered some much-demanded accessibility and latitude for the nation’s small business owners.
While this revision has made the loan’s terms more favorable for most, there are still strict requirements and many steps you must take to get your PPP loan forgiven. Help is available because it is a difficult terrain to navigate alone.
A PPP loan refresher
After a somewhat troubled rollout quickly followed by a second round of funding, close to $650 billion was made available through the loan program, part of the Coronavirus Aid, Relief, and Economic Security (CARES) Act. The Act targets small business owners and is designed to help businesses keep their employees on their payroll and rehire those who were laid off at the start of the shutdown, and cover specific expenses related to overhead.
In addition to their low-interest rate, an attractive feature of the loans is that they are 100% forgivable if the recipients allocate the funds as directed, within the prescribed timelines, and fill out the necessary paperwork.
If you have not yet applied for a PPP loan but your business meets the requirements, you have until June 30, 2020. This deadline has not been extended.
Changes to PPP loan forgiveness terms
The PPP loans’ original terms specified that business owners adhere to a strict 75/25 breakdown of funds, allocating 75% to payroll and 25% to eligible expenses such as interest on mortgages, rent, and utilities. The funds had to be used within eight weeks of disbursement, according to the terms of the PPP Act.
When more than $100 billion remained unallocated after the second round of funding, the PPP was revised based on the demands of many of the nation’s small business advocacy groups and congressional leaders from both sides of the aisle. As a result of the PPP Flexibility Act of 2020, here are some of the revised provisions:
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The 75/25 rule has been relaxed and is now the 60/40 rule, meaning that the percentage of non-payroll expenses eligible for forgiveness was raised to 40%.
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The loan period has been extended, from 8 weeks to 24 weeks, which means you have a longer time to spend the funds before you must apply for forgiveness.
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The period during which an employer can rehire previously laid-off employees or restore employee wages that were reduced has been extended from June 30 to December 31, 2020.
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Borrowers who do not fully restore their workforce can now receive full PPP loan forgiveness because of two new exceptions in the legislation.
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The deferral period for PPP loan amounts that have not been forgiven has been extended.
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The minimum maturity of the loan balance remaining after forgiveness was raised to five years from two years.
The fine print of loan forgiveness
Even with these adjustments, there are strict procedures you must follow to be sure to get your PPP loan forgiven.
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Download the PPP Loan Forgiveness Application.
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Follow the very detailed instructions about how to complete the 11-page application.
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If you need help, several online resources offer guidance, including a free site started by billionaire Mark Cuban.
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Gather all the supplemental documents required by the application and submit the complete package to your lender.
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Have a professional double-check your application to ensure the best results.
Denied. What are your next steps?
Upon receiving your completed and certified PPP Loan Forgiveness Application, your lender has 60 days to issue a decision regarding your eligibility for loan forgiveness. The changes to the original PPP requirements for forgiveness suggest a fluidity in the process that could mean more adjustments are ahead. At the time of this writing, the SBA is revising some of its directives.
If your PPP loan forgiveness application is denied, according to the current law, you may have certain means of redress. It is best to speak to a trusted small business advisor for the latest guidelines about forgiveness appeals. The best way to ensure a PPP loan is forgiven is to strictly adhere to all its terms and file a flawless application.
When it’s back to business as usual
We are all envisioning a time when the need for stimulus funding is behind us. If you are a small business owner who is struggling to manage your accounting functions, Franco Blueprint is available, in times prosperous and tenuous. Reach out for a free consultation with one of our experts today.