In a joint news release on June 8, 2020, the Small Business Administration (SBA) and the Treasury Department announced they will be issuing new rules and guidance for Paycheck Protection Program loan forgiveness; a modified application form; and a modified loan forgiveness application after the Paycheck Protection Program Flexibility Act (PPFA) was signed into law.
To help you stay informed on the impacts of this new legislation, we have outlined key information below:
Covered Period Extended
The period for loan forgiveness has increased from 8-weeks to 24-weeks after the date of loan disbursement. Borrowers who have already received PPP loans retain the option to use an eight-week covered period.
Payroll Costs Percentage Lowered
60% of loan proceeds must be spent on payroll costs, down from 75%–thereby increasing the money that can be spent on operating costs (like rent and utilities) from 25% to 40%.
Repayment Terms Extended
The Act extends the maturity date for all PPP loans approved on or after June 5, 2020, from 2 years to 5 years.
Deferral Period Extended
PPP loan repayment will be deferred until the date on which the SBA remits the 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.
Rehiring Requirements Relaxed
The Act provides a safe harbor from reductions in loan forgiveness based on:
- Reductions in full-time equivalent employees for borrowers that are unable to return to the same level of business activity the business was operating at before February 15, 2020, due to compliance with requirements or guidance issued between March 1, 2020 and December 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.
- Reductions in full-time equivalent employees, to provide protections for borrowers that are both unable to rehire individuals who were employees of the borrower on February 15, 2020, and unable to hire similarly qualified employees for unfilled positions by December 31, 2020.
The new rules will confirm that June 30, 2020, remains the last date on which a PPP loan application can be approved.
When Can You Apply for Forgiveness?
Once your Covered Period has ended and you have gathered all necessary documentation, you may apply for forgiveness using the Community First Bank online portal. Using this portal, you will be able to securely upload your application and supporting documents.
Please note, additional guidance from the SBA will be coming and we are not currently processing PPP loan forgiveness applications. Once guidance has been released, you will receive an update via email.
Don’t rush! Based on loan disbursement dates, the earliest we will able to begin processing eligible applications will be in July.
Our goal is to make this next step as smooth as possible for you and your business. If you have any questions, please reach out to our team by clicking here.
As always, thank you for your continued trust in our services.
For Previous Updates on the CARES Act and Paycheck Protection Program, Click Here.