If you are a Small Business Owner, here is some good news about the forgiveness of PPP loans.
Freelancers, owners of small businesses, and those who are self-employed received some very good news recently – Congress had passed the PPFA (Paycheck Protection Flexibility Act). Thanks to this law, eligible businesses can have some or all of their PPP (Paycheck Protection Program) loans forgiven.
However, stay attentive to the following items:
The deadline for spending loan proceeds is now at the end of the year.
When this program was initially ruled out, businesses had two months, post-loan financing, to utilize the proceeds of the loan if they wished to be eligible for forgiveness of it. However, this timeline has been extended to six months. Because lockdown orders have been extended, and the pandemic isn’t showing any signs of slowing down, the deadline has been changed to December 31st, 2020.
You can use extra loan proceeds to cover expenses unrelated to payroll.
Originally, the law allocated ¾ of a loan’s proceeds towards payroll. For companies with high expenses for goods sold, and/or who couldn’t convince furloughed staff to come back to work, achieving a 75% threshold wasn’t easy. The revised law minimizes the threshold allocated towards payroll down to 60%.
Further versatility to restore the workforce.
To qualify for complete forgiveness, borrowers had until the end of the year to restore workforce wages back to the levels they were at before the pandemic hit. Now there are a few exceptions permitted for not fully restoring a workforce by the end of the year. Borrowers can modify calculations for loan forgiveness if the following circumstances are involved:
- Staff have declined offers made in good faith, despite being given the very same wages and hours they had, pre-pandemic;
- Challenges locating eligible employees;
- Operating restrictions related to Covid-19.
Extension of Loan Terms
If a loan isn’t eligible for forgiveness, a borrower will now have as long as 5 years to pay it back, as opposed to 2. Interest rates will stay at 1%. Because your financial institution will have two months to process the application for loan forgiveness, and three months are given to the SBA to have the request processed, your original payment will now be effective 150 to 180 days after the application.
Contact McNair CPA Las Vegas to act as your financial accountant. We can help with the application for loan forgiveness.