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Small business owners should be aware of the new PPP loan forgiveness rules.
As we have mentioned before, the Paycheck Protection Program is continually changing and evolving as the SBA understands better how small businesses can use it. The Small Business Administration is issuing new rules and guidance regarding PPP loans and the loan forgiveness application. More information will be released soon, but now we know a few important updates that we want to keep our clients informed of.
The Covered Period
The PPP loan covered period is now 24 weeks instead of eight weeks. However, borrowers who have already received PPP loans retain the option to use an eight-week covered period.
Updated Requirements
Previously, there was a requirement that 75% of a borrower’s loan proceeds must be used for payroll costs, and that 75% of the PPP loan forgiveness amount must have been spent on payroll costs during the 24-week loan forgiveness covered period. Those amounts have now been lowered to 60% for both of those requirements.
Additionally, if a borrower uses less than 60% of the loan amount for payroll costs during the covered period, the borrower will continue to be eligible for partial loan forgiveness. That partial loan forgiveness is subject to at least 60% of the loan forgiveness amount used for payroll costs.
New Safe Harbors
There is a new “safe harbor” in the PPP loan forgiveness rules, which protects you from a reduction in the forgiveness amount due to a decrease in full-time equivalent employers who can’t rehire employees or find qualified replacements.
Additionally, there is a safe harbor from a reduction in the forgiveness amount due to a decrease in full-time equivalent employees for employers who can’t return to their prior level of business activity due to compliance with workplace safety requirements.
New Approval Deadline
Finally, June 30, 2020, is the new deadline for a PPP loan application to be approved. More info on PPP loan forgiveness can be found here.
If you have any more questions about PPP loan applications or potential PPP loan forgiveness, you can contact The Harding Group by phone or email.
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