(Yet Another) PPP Loan Update

Changes keep coming!  On June 3^rd, Congress passed another bill making important changes to certain forgiveness and repayment provisions of PPP loans.

If you haven’t yet applied for a PPP loan, funds are still available.  One of our clients applied for a loan last week, and received the proceeds in just a few days.  The deadline to apply appears to remain unchanged at June 30, however applications will close earlier if available funds run out.

It’s important to remember there are actually two different components to the forgiveness formula.  First of course, is what you spend the money on.  That part will be much easier to satisfy now, as you’ll see in a moment.  But the second part, which changed only slightly, is how many people you employ.  This is where we think many borrowers may end up with a surprise, and not get as much of their loan forgiven as they expected.

Here are some brief highlights of the changes made by Congress this week:

• Originally there was an 8 week period to measure your use of loan proceeds for forgiveness. That has changed to 24 weeks, but you can elect to use the original 8 weeks if you wish.
• 60% of the loan amount must be spent on payroll expenses, rather than the original 75%.
• However, if you don’t meet the 60% standard, none of the loan will be forgiven; if you hadn’t met the original 75% standard, only a portion would not have been forgiven.
• In order to obtain 100% loan forgiveness, borrowers now have until December 31^st to restore their FTE (full-time equivalent) employee count to February 15^th levels, with added exceptions for reductions required due to mandatory safety measures.
• Repayment of any portion of the loan not forgiven may be extended to 5 years, rather than 2. If you already have a loan, you need to work with your lender to get the extension, but 5 years will be automatic on any new loans.

Even though the forgiveness side of this program has been expanded, there has been no change to the amount of loan you can apply for, which is still based on 2-1/2 months of your average monthly payroll for all of 2019.

There are plenty of lawmakers and interest groups pushing for even more changes to this program, but it’s hard to know how to plan when the goal line keeps moving!  We recommend you make decisions based on what your business needs, when it needs it.  PPP loan details as they currently stand may perhaps influence some of those decisions, but don’t do anything strictly for the sake of getting more of your loan forgiven; that could end up costing you more in the long run.