SBA COVID-19 Paycheck Protection Program Loans (PPP): New Guidelines
The Paycheck Protection Program Flexibility Act of 2020 includes the following provisions:
- Allows the term of unforgiven principal balance to be 5 years rather than 2 years for existing and new PPP loans, however, both borrower and lender must agree to this change. We will not agree to increase the loan term and will remain 2 years. Our focus is to assist you in the process of having the principal forgiven by SBA.
- Providing additional flexibilities to change the 75%-25% breakdown of payroll to non-payroll expenses to 60%-40%.
- Extend the origination period from June 30, 2020 to December 31, 2020.
- Extend the 8 week covered period to 24 weeks, permitting any borrower to choose to use the originally authorized 8 week covered period.
- Extend the deferral period to be pegged to the date at which the forgiveness amount is remitted to the lender, or 10 months after the end of the 24 week period.
- Allow borrowers with forgiven loans to defer payroll taxes, effectively overruling a prior IRS decision to the contrary.
- Expand the safe harbor for rehiring employees by allowing that the forgiveness will not be affected by a reduction in employees if the borrower is able to document an inability to rehire individuals, to hire similarly qualified employees, or to return to the same level of business activity as it was operating at before February 15, 2020.
- Except for the maturity minimum, all changes apply to new and existing loans.
SBA will now have to provide guidance as to when the process of forgiveness can begin, and we can help you through this process once received from SBA.