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The Latest with the PPP Roller Coaster…Where are We Now?

June 2, 2020

Many business owners are approaching the eight week mark from receipt of their PPP loan funding.  While much guidance has been issued, there are still many questions regarding PPP loan forgiveness.  

The number one concern we hear from our clients is if they will have enough time to spend their PPP loan on qualified expenses in order to achieve full loan forgiveness during their eight week period.  Many had reduced operations or shut down and will not be at full force labor for the entire eight weeks.  It looks like Congress may help, and not a moment too soon!  There is NO FINAL LEGISLATION AT THIS MOMENT but here is a summary of the two major bills in play.

The House of Representatives passed the Paycheck Protection Program Flexibility Act of 2020 (H.R. 7010). H.R. 7010 contains a number of provisions that make the PPP more flexible and make complete forgiveness of the PPP loan more likely for many businesses. The Senate is working on a similar bill but with different provisions.  

Highlights of the House bill include:

  • Extension of the time PPP recipients have to spend their funds from eight weeks to 24 weeks.
  • Lowering the portion of PPP funds borrowers must spend on payroll costs to qualify for full loan forgiveness from 75% to 60%. That change would allow borrowers to direct more funds to other costs such as rent and utilities.
  • Extension of the June 30, 2020 safe-harbor rehiring date until December 31, 2020.
  • Elimination of the exception to the deferral of payment of certain payroll taxes provided in the CARES Act. 

A bill close to a vote in the Senate (but not passed as of this writing) would:

  • Double the covered period of PPP spending to 16 weeks. 
  • Not change the 75% payroll cost requirement. Treasury Secretary Steven Mnuchin has maintained support for the 75% threshold.  

Conclusion

We are hopeful that a compromise between the House and Senate will be reached and passed into law quickly. We will keep you posted with updates.  In the meantime, please keep a close eye on your eight week loan window for your PPP loan forgiveness.  Our core advice is the same on all PPP loan expenditures.  Please use common sense and caution when spending the funds.  Do not spend money on items that are outside of the normal course of business for you.  There are schemes galore that are being floated out there – resist the temptation to go down this road.  There is a key difference between a fraudulent scheme and prudently using your loan in a good faith effort to comply with the rules.  We know how hard it has been for you to make prudent spending decisions with the lack of information from the SBA.  Hang in there!

One final consideration is when to apply with your bank for loan forgiveness. At this time we see no immediate rush to do so, until there is more clarity from the SBA and Treasury, especially given the pending legislation. 

As always, we are here for you and will keep you posted with solid information as it becomes available.  We are in this together!

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