Changes have been made to the PPP loan — Here’s what you need to know.

Things just got switched up for small businesses, but it seems to be leaning in business owners’ favor. This month, the Paycheck Protection Plan Flexibility Act (PPPFA) was officially signed into law.

These updates can make a major impact on any small business that happened to get hit hard during this year’s pandemic. CTBK wants to share this info before the deadline is behind us. To receive the PPP Loan, you must apply by June 30, 2020.

If you’re on the fence about whether or not you think you can benefit from this lending program, here’s a few things you should know.

Spending Time Extended
As of June 5, small business owners now have more time than before to spend their loan proceeds. Originally, they were granted eight weeks, but the recent changes in the PPPFA have extended the time frame to 24 weeks from the time of the loan (or December 31, 2020 – whichever comes first).

Qualifying for Forgiveness
The PPPFA has made it easier for small businesses who received a PPP Loan to qualify for forgiveness. Borrowers must apply for loan forgiveness within 10 months of the end of the spending period (24 weeks from loan date). After that point, any unforgiven amounts transfer into a loan with the 1% interest rate. To apply for forgiveness, fill out the application by June 30.

Borrowed Amounts
The amount of money a small business is allowed to borrow has stayed the same, which is 2.5 times the business’ average monthly payroll.

Lower Restriction on Expenses
During a small business’ spending time frame, up to 40% of funds can be allocated toward non-payroll expenses, which is an increase from 25% in the original plan.

More Time to Repay
Unable to pay now? Pay later.
The PPPFA allows borrowers who have unforgiven loans to pay the dues back over the course of five years, rather than the original two-year timeframe. While borrowers have more time to pay, this does, however, increase the amount of interest that can be racked up. The 1% interest rate has remained the same.

More Time to Rehire
Until the PPPFA, a business’ PPP loan forgiveness amount would be reduced if there was a reduction to your full-time equivalent (FTE) employees during the eight-week or 24-week coverage period. However, perhaps as a result of some businesses being slower to open as a result of the “re-opening phases,” the date to restore that FTE and wage level reduction has been extended from June 30, 2020 to December 31, 2020.  

Can’t Rehire?
Circumstances have made it difficult for some businesses to bring back employees even when they offer them their job back. Previously, this would have impacted the amount of PPP loan that would be forgiven. However, if a business can document (1) that they hired a similarly qualified employee for unfilled positions by December 31, 2020, or (2) that the business was unable to return to its pre-February 15, 2020 levels as a result of complying with COVID-19 regulations or guidance issued by the Department of Health and Human Services, Center for Disease Control and Prevention or Occupational Safety and Health Administration, the forgiveness amount will not be reduced.  

To speak with one of the professionals on the CTBK team regarding the PPP Loan and PPPFA, contact us today.