Coronavirus In Rural America

Updates and Recommendations for PPP Loan Recipients

As of August 6, 2020, more than 5.1 million organizations have received loans through the Paycheck Protection Program, which was created to help small businesses and their employees during the economic recession resulting from the coronavirus pandemic. With such rapid escalation and use of the program, questions, revisions, and clarifications to the program are to be expected. Most recently, SBA released long awaited guidance on PPP loan forgiveness.

Following are resources, recommendations, and a summary of prior PPP information to be aware of as you implement, seek forgiveness of, and account for your PPP loan.

Recent Resources and Posts

PPP Changes and Guidance

On June 5, 2020, the PPP Flexibility Act was signed into law, authorizing key changes to the program. A joint statement by the Small Business Administration and the U.S. Department of the Treasury summarized the changes:

  • Extension of the Covered Period from 8 Weeks to 24 weeks. This extends the covered period (used to spend loan proceeds on eligible expenses) for loan forgiveness from eight (8) weeks after the date of loan disbursement to 24 weeks after the date of loan disbursement. NOTE: Borrowers retain the option to use an eight-week covered period.
  • Minimum Percentage of PPP Loan Forgiveness for Payroll Costs Decreased from 75% to 60%.
  • Changes to the Term of Loans Made after the Passage of the Act. The minimum maturity of loans was increased to five years for loans made after June 5, 2020. The interest rate remains at 1%. Borrowers with loans made before after June 5, 2020 would be required to renegotiate loan terms.
  • Expansion of Social Security Deferral. Borrowers that receive loan forgiveness can defer depositing the employer side of Social Security through December 31, 2020. The deferred employer Social Security tax will be due on December 31, 2021 (50%) and December 31, 2022 (50%).
  • Two New Exceptions to Receive Full PPP Loan Forgiveness. Two exceptions allow borrowers to achieve full PPP loan forgiveness if they are not able to restore FTEs or pay rates by December 31, 2020. Borrowers will not receive a reduction in loan forgiveness due to FTE or pay rate decreases if they are able to:
    1. Document an inability to return to the same level of business activity as such business was operating at before February 15, 2020, due to compliance with requirements established or guidance issued by the Secretary of Health and Human Services, the Director of the Centers for Disease Control and Prevention or the Occupational Safety and Health Administration 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 customer safety requirement related to COVID–19; or
    2. Document that they are unable to rehire individuals who were employees on February 15, 2020, and unable to hire similarly qualified employees.

On June 16, 2020, SBA issued a new interim final rule providing guidance on PPP and the changes made under the PPP Flexibility Act, including:

  • How to calculate employee and owner compensation for loan forgiveness in the new 24-week covered period created by the Paycheck Protection Flexibility Act.
  • The Paycheck Protection Flexibility Act tripled the duration during which PPP recipients could spend the funds and still qualify for loan forgiveness –  a span of time called the covered period. The interim final rule adjusts and adds to previous guidance for calculating loan forgiveness under the original eight-week covered period.
  • The PPP allows loan forgiveness for payroll costs – including salary, wages, and tips – for up to $100,000 annualized per employee, or $15,385 per individual over the eight-week period. The new interim final rule establishes the 24-week maximum for full loan forgiveness at $46,154.