Part 17 – Follow Up: Ask The Experts about PPP Forgiveness

I wanted to personally thank you for attending the webinar last Wednesday. Given the topic was on PPP forgiveness, attendance was at an all time high. Over 100 questions were submitted and since the event we have received dozens more. Even though most of the topics were covered, we are compiling all of the Questions and Answers and later this week I will be sending you a link to that document. In case you would like to watch the recording, click here the password is 7i^91q!?

In the meantime, what’s happened since Wednesday? If you’ve been keeping up on this topic, you likely know that the U.S. Senate passed the House version of the Paycheck Protection Program (PPP) legislation on Wednesday night. A big highlight is the tripling of the time allotted for small businesses and other PPP loan recipients to spend the funds and still qualify for loan forgiveness. The Senate approval sends the House bill, called the Paycheck Protection Flexibility Act of 2020 (PPFA), to President Donald Trump, who is expected to sign it. For your convenience, below recaps the main points covered by the new bill, if you’d like to read it in it’s entirety, please click here.

Expands forgiveness period for expenses to 24 weeks

Currently, only money that gets spent in eight weeks from the date of the loan disbursement – or the date of the first pay period after the loan is disbursed – is eligible for forgiveness.

Businesses can defer principal payments, interest, and fees until the final fness decision is made between lenders and the SBA

Currently, borrowers can defer payment for up to six months. Accumulated delays mean some businesses would have to start paying on a loan that would eventually get forgiven. This bill would prevent that.

The payroll expenditure requirement is reduced to 60%

The requirement is changing from 75% to 60% to maximize forgiveness and there is no “cliff.”

Allows the deferment of the employer portion of payroll taxes. NOW, taxes incurred in 2020 are to be paid in two installments: Half is owed by December 31, 2021, and the other half by December 31, 2022.

This bill strikes the paragraph in The CARES Act that prevents business owners who receive forgiveness on their PPP loans from deferring their payroll taxes.

There are now two new exceptions allowing borrowers to achieve full forgiveness if their workforce is not restored 100%

One exception is if the borrower could not find qualified employees. The second is if the business was unable to restore operations to the level it was on February 20, 2020 (prior to COVID-19).

Any balance of money that is not forgiven can be repaid in 5 years.

Prior to the PPFA, borrowers were given two years to repay any unforgiven amount. The interest rate on the repayment remains the same at 1%.

Please contact your BKM Sowan Horan team member if you need further assistance on these important matters.

Richard J. Sowan

Managing Partner