SBA issues rules and guidance regarding the amended Paycheck Protection Program.

The Flexibility Act: legislation signed June 5 lowered to 60% from 75% the minimum percentage of PPP funds borrowers have to spend on payroll costs to have the loans forgiven.  Plus, extended the covered period from eight weeks to 24 weeks, after loan disbursement.

New rules, guidance, applications coming

(reprint from Journal of Accountancy) The SBA, in consultation with Treasury, will “promptly” issue rules and guidance, a modified borrower application form, and a modified loan forgiveness application implementing the amendments to the PPP made in the new law, the statement said. In addition to confirming that June 30, 2020, remains the last date on which a PPP loan application can be approved, the new rules will implement the following changes:

• Extend the covered period for loan forgiveness from eight weeks after the date of loan disbursement to 24 weeks after the date of loan disbursement, providing substantially greater flexibility for borrowers to qualify for loan forgiveness. Borrowers that have already received PPP loans retain the option to use an eight-week covered period.
• Provide a safe harbor from reductions in loan forgiveness based on reductions in full-time-equivalent (FTE) employees for borrowers that are unable to return to the same level of business activity the business was operating at before Feb. 15, 2020, due to compliance with requirements or guidance issued between March 1, 2020, and Dec. 31, 2020, by the secretary of Health and Human Services, the director of the Centers for Disease Control and Prevention, or the Occupational Safety and Health Administration related to worker or customer safety requirements related to COVID-19.
• Provide a safe harbor from reductions in loan forgiveness based on reductions in FTE employees, to provide protections for borrowers that are both unable to rehire individuals who were employees of the borrower on Feb. 15, 2020, and unable to hire similarly qualified employees for unfilled positions by Dec. 31, 2020.
• Increase to five years the maturity of PPP loans that are approved by the SBA (based on the date the SBA assigns a loan number) on or after June 5, 2020.
• Extend the deferral period for borrower payments of principal, interest, and fees on PPP loans to the date that the SBA remits the borrower’s loan forgiveness amount to the lender (or, if the borrower does not apply for loan forgiveness, 10 months after the end of the borrower’s loan forgiveness covered period).

UPDATE ON PPP LOAN FORGIVENESS:

9/2/20 – PPP Loan Forgiveness Denied – An Overview of the PPP Loan Review Decision and Appeal Process  The National Law Review

Economic Injury Disaster Loans (EIDL) This is a program that “pops up every time there is a disaster in the US (typically a hurricane, flood or fire).  The SBA administrates funds from FEMA.  Direct federal loans, 12 months deferral, 3.75 (profit) 2.75% (non-profits), 30 year fixed rate.MUSINGS FROM DIANE:

What no one discusses is that if the loan is forgiven, these funds cannot be deducted on your tax returns.  Otherwise, this would be ‘double dipping’.  The company gets PPP money to pay its’ employees, then the company’s obligation to repay the loan is forgiven, in total or partially.  Therefore, the company receives a windfall if the company deducts the same employee costs on their taxes as overhead.  Talk to your CPA and make sure to disclose any “free money” from any stimulus funds.