Tag Archives: PPP loan

SBA and Treasury Simplify Forgiveness for PPP Loans Under $50K

On October 8th, the U.S. Treasury Department issued new rules simplifying forgiveness for businesses who took out PPP loans of $50K or less. Back in March, Congress passed the CARES Act, which established the Paycheck Protection Program (PPP), an SBA loan designed to help small businesses maintain their workforce during the COVID-19 crisis. It offered SBA-backed loans that could be forgiven as long as the business met conditions such as retaining full-time employees for eight weeks and using a minimum of 60% of the loan towards payroll costs. However, a number of amendments and seemingly conflicting rules have left many business owners confused about how to go about getting their loans forgiven.

Prior to last week, no loan forgiveness applications were being approved by the SBA. This past Thursday night, a new forgiveness application, Form 3508S, and a new Interim Final Rule regarding loan forgiveness was unveiled.

What this means:

The SBA and the Treasury Department intends that this new application will simplify the forgiveness and loan review process. Under the new rule, PPP borrowers of $50,000 or less won’t have the amount of their loan forgiveness reduced based on reductions in full-time-equivalents or reductions in employee salary or wages. This means that borrowers who received small PPP loans likely won’t be penalized for laying off staff members or cutting employee hours due to financial hardship. The changes are estimated to cover approximately 9 million forgiveness applications. It should be noted that even with the new rule, borrowers are still required to provide additional information to the lender, certify how it’s reviewed, and calculate their payroll and non-payroll costs .

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Have questions about your PPP Loan Forgiveness? Call us at (818) 377-7260 or email us at marketing@www.corpstrat.com

PPP Borrower Application Form (Deadline to Apply: June 30th, 2020)

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(UPDATE as of July 4th 2020: On Saturday, July 4th, President Trump signed an extension of the small business loan Paycheck Protection Program (PPP) into law, according to the White House. PPP will now remain open to applications through August 8th.)

A few weeks ago we updated you on the changes made to the Paycheck Protection Program (PPP) in the PPP reform bill. The revisions are designed to give small business owners more flexibility and time to use and pay off their PPP loan. With the June 30th deadline drawing near, here’s a friendly reminder to apply so you don’t miss out on this opportunity.

If you are eligible, use this form to apply for the Paycheck Protection Program (PPP) with an eligible lender. You can find additional guidance on the SBA website.

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If you have any questions regarding PPP loans, please contact us at marketing@www.corpstrat.com.

PPP Reform Bill Features Extended Forgiveness & Updated Guidelines

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Many business owners who have received their PPP loan are struggling to ensure all their spending falls within the right parameters in order to receive forgiveness. Last week we broke down those strict guidelines and answered some of your most pressing questions. This week, we have some great news for business owners: the Paycheck Protection Program reform bill was signed into law. This means small business owners will gain more flexibility and time to use their PPP loan money. Read on for all the notable changes you need to know about the PPP reform bill and what it means for your loan forgiveness.

Forgiveness Period Has Been Extended

Originally, the PPP loan allowed for 8 weeks to use the allocated funds in order to receive forgiveness, this is now being extended to 24 weeks OR until the end of the year (12/31/2020), whichever is sooner.

New borrowers now have five years to repay the loan instead of two. Existing PPP loans can be extended up to 5 years if the lender and borrower agree. The interest rate will remain at 1%. The bill allows businesses that took a PPP loan to also delay payment of their payroll taxes, which was prohibited under the CARES Act.

Payroll Cost Requirement Has Been Reduced

The previous requirement of using 75% of the PPP loan towards payroll costs has now been reduced to 60%. This means that if you received a $100,000 loan, you now only have to use $60,000 towards payroll costs, freeing up more funds to allocate towards eligible non-payroll costs such as rent and utility payments.

One important note: Previously, payroll cost forgiveness was based on a sliding scale, it is now a cliff. Before, if you spent less than 75% of your loan on payroll costs, it would just reduce your eligible forgiveness amount. Now, if you spend less than 60% of your loan on payroll costs, none of the loan will be forgiven.

More Time to Restore Workforce

Once small business owners received the PPP loan, they had to use it to restore 90% of their workforce. This means that if you had 10 Full-time Equivalents (FTE), you had to hire back 9 of your employees back. Under the this reform bill, employers now have until the end of the year (12/31/2020) to restore their workforce to pre-pandemic levels.

Previous guidance excused employers from bringing back workers if they can document that they were unable to rehire. For example, if an employer extended a good faith offer to a previous employee and that employee rejected the offer to return, the employer could provide documentation that this exchange occurred and be excused from bringing back the worker. The exemptions under the new bill allow borrowers to adjust if they 1.) could not find qualified employees or 2.) were unable to restore business operations to pre-pandemic levels (employment levels before Feb. 15, 2020) due to COVID-19 related operating restrictions.

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We’ll keep you posted as more updates arise. If you have any additional questions, please email us at marketing@www.corpstrat.com.

Confused About Your PPP Loan? We’ve Got Answers For You

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Update: As of June 4th, 2020, the House-passed Payment Protection Program reform bill was approved by the Senate. The PPP Loan forgiveness parameters have changed, please see all updates at our new blog post.

So you just received your PPP loan and you still have a lot of questions. You’re not alone. It’s a new program and the Small Business Administration (SBA) is still releasing new guidelines. The most pressing question we’re hearing from employers who’ve received the loan is: How do I receive forgiveness on my PPP loan? Read on as we answer this and more FAQs you have about PPP loans.

What is the PPP Loan?

The Coronavirus Aid, Relief, and Economic Security Act, or CARES Act, was enacted to provide immediate assistance to individuals, families, and businesses affected by the COVID-19 emergency. Under the CARES act, the SBA was able to temporarily guarantee loans under a new program called the “Payment Protection Program” (PPP). PPP loans are designed to help small businesses, independent contractors and self-employed persons keep their workforce employed during the economic hardship many are experiencing due to COVID-19. Loans guaranteed under the PPP loan will be 100 percent guaranteed by SBA, and the full principal amount of the loans may qualify for loan forgiveness.

What expenses are forgivable with my PPP loan?

In order to receive PPP loan forgiveness, you need to use the loan for eligible expenses. It is required that at least 75% of your PPP loan is used to cover payroll costs. The remaining 25% can go towards specified non-payroll costs that are essential to running a business. (Updated forgiveness parameters as of June 4th, 2020. See our new blog post.)

Speaking of forgiveness, is the PPP loan all or nothing?

No. Whatever portion is not forgiven can be retained and repaid over a 24 month period at just 1% interest. (Updated forgiveness parameters as of June 4th, 2020. See our new blog post.)

If I laid off employees – do I have to hire them back?

No. But, the loan forgiveness amount will be reduced if the business has reduced its number of full-time equivalent (FTE) employees or has reduced the salary or wages of certain employees based on the following formulas:

Formula for reduction in FTE employees:

What percentage of the loan has to be used towards payroll?

Not more than 25 percent of the loan forgiveness amount can be used towards non-payroll costs (i.e.,mortgage interest, rent and utilities). Additionally, proceeds from any advance up to $10,000 on an Economic Injury Disaster Loan (EIDL) will be deducted from the loan forgiveness amount. (Updated forgiveness parameters as of June 4th, 2020. See our new blog post.)

When does my eight-week period start?

The covered period begins on the date the lender makes the first disbursement of the loan, this means it begins the first day a loan payment is sent out.

After 8 weeks I can’t afford to keep my employees – what do I do?

Once the 8 weeks is up, continue running your business as you would otherwise do so. Even though it’s a difficult step, moving forward with furloughing or termination if necessary will allow your employees to sign up for state and federal resources. Note that any change in employment status requires paying out any PTO or unused leave. (Updated forgiveness parameters as of June 4th, 2020. See our new blog post.)

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We understand that these are confusing and uncertain times. That’s why we’re always here to help, contact your CorpStrat rep with questions, anytime! Call us toll free at (800) 914-3564 or email us at info@www.corpstrat.com.