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The changes stem from the Paycheck Protection Program Flexibility Act (PPPFA), quickly passed by Congress on June 5, and give borrowers more control over how they can spend the loan. P3 loans are designed to help small businesses keep workers on the payroll and can be canceled entirely if the borrower meets the loan terms.
Commerce Department commissioner Michelle Kommer noted in an ND Commerce Department online meeting on June 18 that rule clarification has yet to be made.
“Although we have scheduled this business briefing in the hope that the SBA / Trésor guidelines will be finalized by then, this is not the case,” she said.
– To begin with, the maturity date for PPP loans has been extended from two years to five years. This extension applies to loans taken out after June 5. Loans created before this date can be extended, but the borrower and lender must agree on this. The extension gives the borrower more time to repay the loan if it is not fully canceled. Loan payments were initially deferred for up to a year, but this was extended.
– The period during which the loan must be spent has also been extended from eight weeks to 24 weeks from the date of creation of the loan, or until December 31st. This means that a borrower has more time to spend the money and increase the chance of forgiveness. Borrowers can request a discount at any time during the 24 week period.
– Another big change is the ratio of how funds are to be spent. The PPPFA allows borrowers to spend 60% of the loan on salaries and 40% on other business expenses. Previously, the ratio was 75% and 25%. A business must spend the full 60% on salaries, otherwise the loans cannot be canceled. The same is true if a business spends more than 40% of the loan on business-related expenses, such as rent, mortgage interest, and utilities. The list of eligible expenses has been extended to certain agricultural operations, including the rental of agricultural land for remuneration.
– The date on which employers must rehire their workers has been extended from June 30 to December 31. This gives them more time to restore their workforce to pre-pandemic levels. This has been a challenge because not all employees want to return to work, for the sake of COVID-19 or whatever. Loan cancellation for borrowers who fail to restore their workforce to pre-pandemic levels will not be affected if they document their inability to do so, showing their lender resignation letters, for example, or by showing that they had to fire workers who refuse to do so. to recover. Companies that fail to return to pre-pandemic employment levels will not be penalized if they can demonstrate that the failure is due to compliance with social distancing guidelines or other Department of Health rules.
– EIDL (Economic Injury and Disaster Loans) Loan advances are back. The SBA previously shut down the online application portal, believing that all applications from the national pipeline would use the funds. This was not the case and loan applications are once again being accepted on a first-come-first basis. Advance loans offer $ 1,000 per full-time employee, up to $ 10,000, and can be canceled if taken out alone. When combined with a PPP loan, the amount will be deducted from the repayable part, which can leave a borrower with a residual amount to pay.
Asking for a loan forgiveness can be confusing as there are a myriad of conditions to be met, and Al Haut, district manager of the Small Business Administration, recommends borrowers stay in the know by visiting the sba.gov/ppp websites. and treasury.gov for rule updates.
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