PPP Update Brought to You by Ben Brown and Riley Gardner

On Friday, June 5, 2020, President Trump signed the Paycheck Protection Program Flexibility Act (PPPFA), which should make it substantially easier for businesses to receive forgiveness of existing PPP loans.

The new PPPFA makes the following changes to the Paycheck Protection Program:

  • Increases the “forgiveness period” from 8 weeks to 24 weeks, allowing businesses nearly 6 months to spend the loan funds on qualified expenses
  • Decrease the required payroll spending from 75% of the forgiveness amount to 60%
  • Expands the repayment period for unforgiven loans from 2 years to 5 years and extends the deferral of the first payment due date from 6 months to 10 months.
  • Extends the June 30 “safe harbor” deadline to rehire workers.

These changes are applicable to all loans, including loans that were funded before the Bill was signed into law.

While these changes are welcomed, they raise significant unanswered questions about the forgiveness process. How will the new extended period be handled (i.e. does a business that used 100% of the funds in 12 weeks need to wait until the end of the 24 week period to apply for forgiveness)? Will the $15,385 salary cap be increased (currently 8/52 of the $100,000 annual limit)? How will the FTE ratio calculation be handled (do businesses need to maintain headcount for the 24 weeks)?

Unfortunately, much of the SBA’s guidance to date is based on the old rules that no longer apply, and there haven’t been significant updates in the 10 days since the PPPFA became law. The SBA has said that additional information, including a revised and simplified forgiveness application, will be provided shortly.

We’re anxiously awaiting additional guidance, and we plan to provide a PPP Update webinar as soon as the SBA provides additional information. Stay tuned…

Ben Brown, CPA, Managing Partner, B|F|B|A
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Riley Gardner, Senior Credit Analyst, River City Bank