Modifications to the PPP Program

Last night the Senate approved a bipartisan bill to loosen Payroll Protection Program (PPP) requirements. The bill now waits for the President's approval. The new requirements make the lending terms more favorable to businesses that have been shut down or are not operating at full capacity. These changes will also make it easier for borrowers to attain full forgiveness.

The latest regulations extend the covered loan period and period to rehire employees, relaxes the 75/25 rule, extends the loan deferral and loan forgiveness application periods, provides two exemptions to the full-time equivalent (FTE) headcount requirement, and includes delaying the payment of federal payroll taxes from 2020 until 2021 and 2022. 

Below is a summary of the PPP changes. We are expecting additional guidance from the Treasury and SBA soon. 

• Borrowers can extend the eight-week loan covered period to the earlier date of 24 weeks or December 31, 2020. However, borrowers can elect to end the covered period after eight weeks.
• Borrowers can use the earlier period of 24-weeks or December 31, 2020 to restore their workforce headcount and wages to pre-pandemic levels required for forgiveness. 
• Borrowers are required to spend at least 60% of the covered loan on payroll costs and the remainder of the loan on non-payroll cost (rent or lease payments, utility payments, and mortgage interest payments). 
• Borrowers have 10 months after the last day of the covered period to apply for loan forgiveness.
• Borrowers who do not apply for forgiveness must begin making payments on principal, interest, and fees on the covered loan, 10 months after the last day of the covered period.
• Borrowers can defer loan payments for one year.
• Borrowers with loans issued after the enactment date have five years to repay loans at 1% interest. 
• Borrowers can now achieve full forgiveness if they do not restore their total workforce. If an employer is unable to rehire individuals who were employees of the borrower on February 15, 2020 and unable to hire similarly qualified employees for unfilled positions on or before December 31, 2020, then the amount of loan forgiveness shall be determined without regard to a proportional reduction in full-time equivalents.
• If the employer is unable to return to the same level of business activity as such business was operating at on February 15, 2020 due to compliance requirements issued by HHS, CDC, or OSHA during the period beginning on March 1, 2020 and ending December 31, 2020 related to the maintenance of standards for sanitation, social distancing, or any other worker or safety requirement related to COVID-19, then the amount of loan forgiveness shall be determined without regard to a proportional reduction in full-time equivalents.
• Borrowers are allowed to delay payment of federal payroll taxes from 2020 to 2021 and 2022.

The PPP program remains open and banks continue to accept applications. The program closes on December 31, 2020.

Contact your Whittlesey advisor with questions on the new legislation and for assistance completing your PPP Loan Forgiveness Application.