Small Business Owners Get Good News on PPP Loan Forgiveness

Posted on 29. Jul, 2020 by in COVID-19, Small Business Tips

Small business owners, self-employed workers and freelancers received some welcome news when Congress recently passed the Paycheck Protection Flexibility Act. This new law clarifies how businesses can qualify to have all or a portion of its Paycheck Protection Program (PPP) loan forgiven.

Here is what you need to know:

December 31, 2020 is the new deadline to spend loan proceeds. Initially, businesses were given 8 weeks after loan funding to use the loan’s proceeds to qualify for loan forgiveness. That timeline has now moved to 24 weeks. Due to the extended stay-at-home orders and further assessment of the pandemic this deadline was extended. The new deadline is now effectively December 31, 2020.

More loan proceeds can be used for non-payroll expenses. The original law required 75% of loan proceeds to be spent on payroll. Hitting this 75% threshold was problematic for businesses with high cost of goods sold or who had trouble convincing furloughed workers to return to work. The new law reduces the amount of loan proceeds required to be spent on payroll to 60%.

More flexibility in fully restoring workforce. Borrowers now have through December 31, 2020 to restore their workforce levels and wages to the pre-pandemic levels required for full forgiveness. There are three exceptions allowed for not having a fully-restored workforce by Dec. 31. Borrowers can adjust their loan forgiveness calculations because of:

  • Employees who turned down good faith offers to be re-hired at the same hours and wages as before the pandemic;
  • Difficulty finding qualified employees;
  • COVID-19 related operating restrictions

Loan terms extended. Borrowers now have up to five years instead of two to repay loans that do not quality for forgiveness. The interest rate remains at 1%. Your bank has 60 days to process your loan forgiveness application and the SBA has 90 days to process the request. Your initial payment is now effectively five to six months after your forgiveness application.

What you need to do

  • Download EZ Application Form. If you are a self-employed worker, independent contractor or sole proprietor who has no employees, you may be eligible to use the EZ Loan Forgiveness Application. Click here to download the EZ form. Click here to download instructions for the EZ form.
  • Download Regular Application Form. You’ll need to complete the regular loan forgiveness application if you aren’t eligible to use the EZ Loan Forgiveness Application. Click here to download the regular application.
  • Stay in contact with your lending institution about when and how to complete the loan forgiveness application.
  • Consider reaching out to your legislators to let your voice be heard on how you were impacted. Share your story on your PPP loan experience as several U.S. Senators indicated that there will be more changes in the future regarding the program.

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