If you are subscribed to our newsletter, you may know that under section 1106 of the CARES Act, businesses that qualify and are approved for the PPP loan are eligible for forgiveness of up to 100% of the costs incurred and payments made during an original 8-week period. The loan is meant to cover payroll costs and mortgage interest, rents, and utilities.
However, the guidelines that borrowers must follow in order to achieve loan forgiveness recently changed under the Paycheck Protection Flexibility Act. This helps but also seems to complicate things, especially for those who had already secured a loan under the previous guidelines.
Here are some of the recent changes to the PPP loan Rules regarding loan forgiveness eligibility:
- The spending time frame has been extended from 8 weeks to 24 weeks. This starts on the day the funds are received.
- A business owner must spend 60% of the PPP loan funds on payroll expenses. Those who spend less than this percentage can still qualify for partial forgiveness. Before the Flexibility Act, this percentage was 75%.
- In order to achieve maximum forgiveness, businesses must rehire employees who were on staff as of February 15th. Originally, they had to complete this by June 30th. Now, employers have until December 31st.
- Employers now also have more time to repay. Previously, any portion of the loan ineligible for forgiveness was expected to be paid within 2 years. This time frame has now been extended to 5 years for loans that were made on or after June 5.
Important Things to Note
Even though the Payment Protection Program still has over $130 billion left to assist struggling businesses (according to SBA), the last day the PPP loan application can be approved is June 30. It’s also important that for those who received their PPP loan funding early, these new changes may not be applicable. If you have questions or concerns regarding this new information, an accountant on our team will gladly assist you!
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