As the Payroll Protection Program continues to evolve, keeping abreast of developments can be arduous. To assist borrowers with their financial planning and forgiveness applications, below is a summary of recent PPP and SBA revisions, clarifications and updates through June 16, 2020:
- Borrowers now have 24 weeks (previously, 8 weeks) to spend loan proceeds, and can start the covered period either on the date borrowers receives the loan proceeds or on the first day of the next biweekly or more frequent payroll cycle. However, if a borrower’s loan was made before June 5, 2020, the borrower may elect to use either the 24-week or 8-week period.
- Nonpayroll costs are now eligible for loan forgiveness if they were either (a) paid during the covered period or (b) incurred during the period but paid on a regular billing date after the period.
- Payroll costs now include employee hazard pay and bonuses, subject to the $100,000 annualized cap.
- Borrowers must use 60% of PPP funds for payroll costs to achieve full loan forgiveness, reduced from the previous 75% requirement. Borrowers which do not use the full 60% for payroll costs will still be eligible for partial loan forgiveness.
- A borrower’s loan forgiveness amount will not be negatively impacted by employees who decline offers of rehire, provided the borrower makes a good faith, written offer to rehire the employee at the same wages and hours, the employee rejects the offer, and the borrower informs the state unemployment office within 30 days of the employee’s rejection. The borrower must retain records of the offer and rejection.
- Likewise, a borrower’s loan forgiveness amount will not be negatively impacted by employees who are fired for cause, voluntarily resign or voluntarily request a reduced schedule during the covered period. Borrowers must maintain records that document the reason that employees are no longer on the payroll.
- Provided an employee’s wage rate remains the same, a reduction in wages due to reduced hours will be treated only as a change in FTE status; it will also not be counted as a reduction in wages.
- Borrowers can obtain full loan forgiveness if they fully restore their workforce to pre-Covid-19 levels (defined as prior to February 15, 2020) by December 31, 2020, extending the previous June 30, 2020 deadline.
- Borrowers can also obtain full forgiveness without fully restoring their workforce by December 31, 2020 if the borrower provides documented evidence that (1) it cannot rehire previous employees or locate qualified employees, or (2) if, between March 1, 2020, and December 31, 2020, the borrower is unable to restore operations levels due to Covid-19 restrictions “related to the maintenance of standards for sanitation, social distancing, or any other worker or customer safety requirement related to COVID–19.”
- In other words, reductions or fluctuations in a borrower’s workforce or wages between February 15, 2020 and December 31, 2020 will not impact loan forgiveness, provided the workforce and wages are restored to February 15, 2020 levels.
- Loan maturity for PPP loans made prior to June 5, 2020 is two years, and loan maturity for PPP loans made after June 5, 2020 is five years. However, borrowers and lenders may mutually agree to extend the maturity of any PPP loan from two years to five years.
- Once the borrower submits the loan forgiveness application and documentation to its lender, the lender has 60 days to make a decision regarding loan forgiveness. The lender then sends its determination of full or partial forgiveness (or ineligibility) to the SBA. The SBA then has 90 days to render its decision, although the SBA can independently review loan and forgiveness documentation at any time. Borrowers can appeal any decision made by the SBA, and must retain all documentation relative to the loan for 6 years after the date the loan is forgiven or repaid in full.
- Borrowers which submit their loan forgiveness application within 10 months after the end of their covered period (either 8 or 24 weeks, as discussed above) are not required to make principal and interest payments until the SBA remits the borrower’s loan forgiveness amount to the borrower’s lender. If the borrower fails to apply for forgiveness, the deferral period lasts until 10 months after the end of the applicable covered period.
- Interest continues to accrue during the deferment period.
- Borrowers may now defer payroll tax payments even if they receive PPP loan forgiveness, eliminating the previous requirement that makes a borrower “who has such indebtedness forgiven ineligible to deter payroll tax payments.”
- June 30, 2020 remains the deadline to submit a PPP loan application. As of June 14, 2020:
- Total loans: 4,576,388
- Total amount disbursed: $512,271,684.14
- Total remaining available funds: $129,753,635,070