Insights 6/10/20

For those of you that have secured a PPP loan through your lender, you may have heard that there are now approved regulations affecting the time period and qualifying costs to be eligible for loan forgiveness. Generally, these appear to be more favorable, meaning that more companies should be able to use the PPP funds for the intended purposes over a now extended time period. For clarification and specific questions you may want to contact your lender.

Specifically, on Monday, June 8, the SBA and Treasury Department issued a joint statement regarding the recently passed Payroll Protection Program Flexibility Act (the “PPPFA” or the “Act”), which amended the Payroll Protection Program contained within the CARES Act. They also mentioned that they would shortly release rules to clear up some of the ambiguity that still exists and will provide a modified borrower application form and a modified loan forgiveness application that implements these amendments to the PPP, which RMI will send out when available. The PPPFA will implement the following important changes:

  • Extend the covered period for loan forgiveness from eight weeks after the date of loan disbursement to 24 weeks after the date of loan disbursement, which will provide greater flexibility for borrowers to qualify for loan forgiveness. Borrowers who have already received PPP loans retain the option to use an eight-week covered period, though they can use a longer period. How long, whether 24 weeks or something in between (12, 16, etc.) is not yet clear.
  • Lower the requirements that 75 percent of loan proceeds must be used for payroll costs to 60 percent. If a borrower uses less than 60 percent of the loan amount for payroll costs during the forgiveness covered period, the borrower will continue to be eligible for partial loan forgiveness, subject to at least 60 percent of the loan forgiveness amount having been used for payroll costs.
  • Provide a safe harbor from reductions in loan forgiveness based on reductions in FTE employees for borrowers that are unable to return to the same level of business activity the business was operating at before February 15, 2020.
  • Provide a safe harbor from reductions in loan forgiveness based on reductions in FTE 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.
  • Extend the deferral period for borrower payments of principal, interest, and fees on PPP loans to the date that SBA remits the borrower’s 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).
  • Permit borrowers to use the CARES Act’s employment tax deferral even if they have or are seeking loan forgiveness, which they could not do before.
  • In addition, the new rules will confirm that June 30, 2020, remains the last date on which a PPP loan application can be approved.

In case you haven’t accessed the RMI reports that your lender may require for PPP loan forgiveness, you may access those here: