PPP Loan Update
June 2, 2020
Accounting Services, Business Services, General
PPP Loan Program
The initial round of $349 billion in PPP loan funding was exhausted on April 16 after just 13 days as millions of small businesses flooded lenders with applications. The second round of $320 billion was launched April 27 and many small businesses that were left behind were able to secure funding.
SBA and Treasury were late in issuing rules on how to calculate loan forgiveness leaving not only business owners confused but also professionals such as CPAs who were assisting clients with application process and forgiveness calculations.
Current requirements for forgiveness:
– At least 75% must be spent on payroll costs;
– The loan amount must be used within eight weeks after funds are received;
– If that percentage isn’t met, or a firm reduces head count or salaries, the amount forgiven is reduced and must be repaid in two years at 1% interest.
The eight-week period began expiring Friday for the first loan recipients after the Small Business Administration program opened April 3 leaving businesses concerned about whether they’d have to repay all or part of loans they couldn’t afford.
Last week the House passed a bill with changes to the Paycheck Protection Program that would give small businesses more flexibility in using the money from the fund.
Proposed new requirements for forgiveness:
– The House bill would lower to 60% the current requirement that 75% of a loan be used on payroll allowing businesses to spend more on overhead expenses, especially in high-rent areas;
– The bill would extend the eight-week period when proceeds must be spent for loans to be forgiven to 24 weeks or until the end of the year, whichever comes first;
– Businesses would also have as long as five years, instead of two years, to repay any money owed on a loan.
The House has left Washington with the next scheduled vote on June 30. It is not yet clear if all senators will agree to the bill without changes.
There will be other modifications to the original CARES Act such as payroll tax credits and we will publish additional information once the bill is voted on and signed by the President.
For more information on how your PPP Loan affects your business, give us a call at 407-650-9088 or email Info@MyCPASolutions.com.