During the COVID-19 pandemic, many small businesses were able to work through their local banks and SBA lenders to access funds through the Payroll Protection Program (PPP). In response to a national emergency, this program was created quickly and many revisions to the terms have been made along the way. The most recent changes to the forgiveness terms were passed in the Paycheck Protection Program Flexibility Act and signed into law on June 5.
Many of my small business owner clients and friends were able to obtain funding through this program, and are now preparing to apply for forgiveness. If you are a small business owner and have not yet applied for the PPP program and feel like you might be eligible, act quickly. The deadline to apply through an approved SBA lender is June 30. I wanted to share with you some of the most important term revisions that the June 5 Flexibility Act created.
- Extends the deadline to use PPP funds from June 30 to December 31, 2020.
- Reduces the proportion of the loan that must be used for payroll-related costs from 75% to 60%.
- Payback terms extended from two years to five years. No retroactive application of this rule for notes that were in place prior to June 5.
- Eliminates the original forgiveness penalty based on businesses being required to maintain employee headcount at the same level as pre COVID-19.
- Gives businesses 10 months to apply for loan forgiveness with their loan originator.
- Defers loan payments of any kind until a forgiveness decision is made on each case by the SBA and original lender.
- The period of time allowed to spend funds on allowable business expenses and apply for forgiveness is extended from the original 8 week period to 24 weeks from the date of loan issuance.
- Businesses who received PPP funds can now utilize the payroll tax deferral rules that were included in the CARES Act and previously excluded PPP borrowers.
Your CPA business advisor can be a valuable resource in helping you with the application for PPP loan forgiveness.
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