If you were granted a Paycheck Protection Program (PPP) loan from the Small Business Administration (SBA) in the last few months, you’ve probably heard conflicting opinions about how to spend the money to make sure your loan is forgiven. Keeping track of the shifting program rules is tough.
It’s clear that Congress intends for you to keep the loan funds and put them to good use, keeping your business afloat. But there is a catch. Providing the SBA (through your lender) with documentation about how you use the money—and when—is a necessary step to keeping every penny.
5 Game Changers for PPP Loan Forgiveness
Here’s what we know about several game-changing revisions to the PPP loan forgiveness program:
- You’ve got more time to spend the money. Remember how you were supposed to spend the cash within 8 weeks of receiving it? Now you’ve got 24 weeks.
- You’ve got more time to bring back employees or hire new ones. Now the deadline to do this is December 31, 2020. There’s flexibility, too, regarding rehiring employees. If you haven’t been able to bring your staff back to pre-coronavirus levels for certain (understandable) reasons, you can document what happened and still possibly receive loan forgiveness. This applies to situations like:
- An employee doesn’t want to come back.
- You had to fire an employee for cause.
- You were forced to seek a similarly qualified employee but can’t find one yet.
- You’ve got more time to restore employees’ wages. Now that deadline is December 31, 2020. The SBA recognizes that many businesses can’t reopen even close to what their full capacity once was. So they’ve created more “safe harbor” rules to help you explain your circumstances and receive forgiveness for all or part of the loan.
- You can spend less money on payroll and more money on other business expenses. The ratio has changed—you only need to prove that you spent 60% of the funds on payroll, and 40% can be spent on things like rent, mortgage interest on business assets or property, utilities, and things like transportation or computer expenses.
- If you have to pay back any funds, you have to do so within 5 years instead of 2.
The SBA is producing a revised loan forgiveness application, which should be available to lenders very soon. More details about loan forgiveness provisions (as outlined by the SBA previous to these most recent changes) are outlined in this blog and can serve as a guideline. As always, if you need a hand figuring out the next steps with the PPP loan, reach out to your lender or to us for help.
There is an overwhelming amount of info that has surfaced for the forgiveness portion of the PPP. We’ve found this to be a helpful website to help customers fill out the forgiveness application.