PPP Loan Update
*This post is continuously updated with new information. Please see dated updates below.*
May 28, 2020– The House and Senate are proposing bills with considerable amendments to the PPP loan program. As of right now nothing has changed, however, the House will be meeting today, May 28, and Senate to follow soon after. The proposed legislation of the House versus that of the Senate are very similar with slight differences, below is a basic outline of issues being addressed:
- The House would extend the end of the borrowers covered period from eight weeks to either 24 weeks after loan origination, or December 31, 2020, whichever date is latter. The Senate proposed to only double the covered period to 16 weeks versus the previous 8 weeks.
- The House and Senate bills would extend the PPP loan program from June 30, 2020 to December 31, 2020.
- The House bill will give borrowers until December 31, 2020 to restore headcount or demonstrate an inability to hire similarly qualified employees by December 31, or the inability to return to the same level of business operation prior to February 15, 2020.
- The House bill will prevent the SBA limitations of how much of the PPP loan can be spent on non-payroll costs.
- The House bill would extend the minimum maturity of the loan to five years.
As we had mentioned, no changes to the current bill have been passed. We will update you as we know more information.
May 28 Update– The House has passed the bill, but the Senate bill has not been passed yet. Senators will not convene again until next week.
June 4 Update– Late evening, Wednesday, June 3, Senate approved the bill that will alter some the terms of the PPP Loan and provide additional relief for borrowers as they seek for their loan amounts. Here are some of the main takeaways of what those changes will be:
Borrowers will have longer to repay the loan proceeds that are forgiven.
- This new bill extends the maturity date from 2-years to 5-years. However, this only applies to PPP loans taken after this bill has passed. Previous PPP loans will not be grandfathered into this later maturity period, but lenders and borrowers are free to renegotiate the terms of their existing PPP loan to match the permitted 5-year period.
Loan forgiveness will be easier to achieve.
- Extension of “covered period”.
- The “covered period” is extended from eight weeks to 24 weeks from the date of the loan’s origination, or December 31, 2020, whichever date comes first.
- Borrowers are not required to adopt the 24-week covered period and may elect to follow the previous 8-week period if you wish to not wait until the end of the year to apply for forgiveness.
- More of your proceeds can spend on non-payroll costs.
- The expanded “covered period” allows for four months of additional mortgage interest, rent, and utility costs to be added into the forgiveness amount.
- In addition, the previous cap of 25% for non-payroll costs has been increased to 40%. HOWEVER, if the borrower fails to spend 60% of the loan proceeds on payroll costs, NONE of the loan will be forgiven. That is a significant change from the previous terms.
- Borrowers will have more time to replace FTEs or restore salaries.
- Previously the terms indicated that borrowers were to fully restore FTEs or salary/hourly wage to their February 15, 2020, levels before June 30, 2020. This new bill extends the June 30, deadline to December 31, 2020. As long as the FTEs or salary/hourly wage are restored to your February 15 levels prior to the end of the year, there will not be a reduction in forgiveness.
Businesses that remain partially or fully closed through the end of the year will receive additional relief.
- The bill outlines that during the period of February 15, 2020, to December 31, 2020, the amount of forgiveness will not be reduced when a borrower experiences a loss of FTEs if the borrower, in good faith, is able to document any of the below concessions:
- Inability to rehire individuals who were employees on February 15.
- Inability to hire similarly qualified employees for unfilled positions by December 31.
- Bar and restaurant owners listen up! The inability to return to the same level of business activity as such business was operating before February 15, due to requirements established by the Security of Health and Human Services, CDC, or OSHA from the time of March 21 to December 31. These health and safety requirements would be related to worker or customer safety, social distancing, and standards for sanitation related to COVID-19.
Certain payroll taxes and be deferred for PPP loan borrowers
- Under the new bill, it allows the employer to defer all of its social security tax burden to 2021 and 2022, even if the PPP loan is forgiven prior to December 31, 2020.
This bill has been moved to the President’s desk for signature and we will keep you informed as we hear more.
June 5 Update– The bill has been signed by President Trump and amendments above will be applied.
June 15 Update- New guidance was released on the PPP loan eligibility. Previously, to be eligible to apply one must have NOT been convicted of a felony within the past 5 years. This has been revised to allow those convicted of felonies 1 year or longer to be eligible to apply. However, those convicted of a felony within the past year remain ineligible.
July 6 Update- The President signed a bill that extended the PPP loan application window to August 8.