PPP Loan Forgiveness

Forgiveness of the Paycheck Protection Program (PPP) loan just got a lot easier for small business owners (less than 500 employees) who received funds from the federal government to help keep their business afloat and their employees on payroll during the mandated “stay-at-home” order and the phased reopening of businesses.

Congress passed and President Trump has signed the Paycheck Protection Flexibility Act which adds additional time to use PPP funds, reduces the percentage that must be spent on direct payroll costs, provides a “safe harbor” for reduction in staff and allows the deferral of payroll taxes. With these changes, almost every business that received PPP funds should be able to qualify for loan forgiveness but, if they don’t, the period for repayment has also been extended.

• The Flexibility Act allows PPP borrowers to extend the eight-week period for fund usage to 24 weeks if they choose making it easier to qualify for forgiveness of the loan.
• The Flexibility Act lowers the amount that must be spent on direct payroll costs from 75% to 60% in order to qualify for loan forgiveness. Forty percent of the loan may be used for mortgage or rent payment and utilities.
• The deadline for using PPP funds has been extended from June 30 to December 31, 2020.
• The “safe harbor” provision addresses reductions in workforce due to employees who turn down a rehire offer for the same hours and wages they received before the pandemic, inability to fill vacancies with qualified workers, or reduction in business operations.
• The loan repayment period has been extended from two years to five years. The interest rate remains at 1%.
• The Flexibility Act also allows PPP borrowers to delay payment of payroll taxes, which was prohibited under the Coronavirus Aid, Relief and Economic Security (CARES) Act.

Remember, it is critical to document how PPP funds are expended so that you can apply for loan forgiveness. It is also important to document rehire offers to qualify for the “safe harbor” provision if you have fewer employees when you apply for loan forgiveness.

PPP funds are still available to qualified businesses. Contact your banking institution for more information about the application process. If you applied previously but were not approved, you may want to consider applying again through a community-based banking institution.

An HR professional can help you with all of your human resources needs. From hiring the right employees, running background checks, creating employee handbooks that include anti-harassment policies and procedures, and so much more, Next Level Solutions can work with you to provide the services that you need to run your business.