A bipartisan bill called The Paycheck Protection Small Business Forgiveness Act has been introduced into the Senate that would allow small businesses who received a Paycheck Protection Program (PPP) loan of $150,000 or less to obtain automatic forgiveness after submitting a one-page attestation form. The attestation form would be limited to one-page, and the small business would simply attest that the loan is eligible for forgiveness and that the business complied with the requirements of the Paycheck Protection Program found in the CARES Act.
Congress just passed the Paycheck Protection Flexibility Act of 2020 and improved the Paycheck Protection Program (PPPP) for small-business loans. The bill enhances the PPP by increasing the time small businesses can use funds and receive forgiveness from eight weeks to twenty-four weeks and by reducing the payroll cost rule from 75 percent to 60 percent. The President is expected to sign the bill immediately, and the SBA and Treasury will be tasked to update their regulations, guidance and forgiveness application.
Many small business owners who have been approved for Paycheck Protection Program loans (“PPP”) are realizing that the loan isn’t as forgivable as they’d hoped.
The amount a small business can qualify to have forgiven must primarily be payroll costs. The SBA’s rulemaking has stated that at least 75% of the forgiveness request must be payroll costs but can also contain up to 25% of other approved expenses under the law such as rent, mortgage interest and utilities. That rule seems to be widely understood and so long as small business owners are spending 75% of their PPP funds on payroll this rule won’t frustrate small business owners when it comes time to forgiveness.
For details on the PPP loan program in general, please refer to my prior article here.
On Tuesday, the Senate approved an additional $310B of funding for the popular Paycheck Protection Program (PPP) loans for small-business owners, and the House is expected to approve the measure as soon as today.
The original bill passed passed on March 27 and established $349 billion in funding for PPP loans, but that money evaporated in just two weeks. Consequently, many business owners were left unfunded or were unable to find a bank that would even take their application. This additional $310 billion will go much more quickly than the first round, as the pipeline is full of those who applied and missed out initially, as well as others who have since located a bank willing to take their application.
The American Bankers Association reported on April 12 that $205 billion of the $350 billion appropriated for Paycheck Protection Program (PPP) loans has been claimed. This number presumably represents applications that banks have processed and that have been approved through the Small Business Association (SBA). Keep in mind, approval by the SBA occurs before the loans are actually documented and funded.
While some small-business owners have received their PPP funds, the vast majority are still looking for a bank or are somewhere in their bank’s application or funding process. Frustrations are running high amongst small-business owners, but there is hope that the funding of these loans will increase significantly over the next week, as banks who started taking applications early are now moving on to the loan document and funding process. (For an overview of the PPP loan and how it can be forgiven, please refer to my prior article here.)