5 Jul

PPP Loan Program Deadline Extended to August 8th

The President signed a bill into law extending the deadline to apply for a loan through the Paycheck Protection Program (PPP) to August 8th. The original deadline to apply for a PPP loan was June 30th. However, it was discovered that roughly $130 billion still remained in the loan program (Congress originally allocated $660 billion to the program). Both chambers of Congress approved the PPP loan program extension unanimously and the President signed it into law.

The sponsors of the PPP declared they want to re-purpose the program to better serve the challenges businesses are facing now, according to NPR.org.

“As the scope of the financial damage done to small businesses by the pandemic and resulting lockdowns has grown, it has become clear that longer-term support is necessary,” said Florida Sen. Marco Rubio.

Background of the PPP Program

The PPP was a key component of the $2.2 trillion CARES Act. Congress originally allocated $350 billion to the program with the objective of providing forgivable loans to help small business owners cover payroll and overhead costs in the midst of the Coronavirus pandemic. The PPP program was extremely popular and was inundated by a wave of initial applications. Additionally, the roll out of the program was messy and chaotic. That combination led to the PPP program running out of money in just a matter of weeks, as highlighted in a great Forbes article. The led to Congress enacting a piece of reform legislation that added another $310 billion to the program and providing greater flexibility for loan forgiveness.

Important Info Going Forward

  • When Congress returns from recess after the July Fourth holiday, they need to figure out how to most effectively allocate the remaining $130 billion in the program and determine the next steps on how to help support struggling small businesses, especially in the wake of states being forced to issue new shutdown orders from a dramatic spike in COVID-19 cases.
  • Treasury Secretary Steven Mnuchin stated the next round of small business support will need to be “more targeted” to specific industries that are struggling the most, including hotels and restaurants.
  • There is a legislative proposal being debated in Congress that would allow businesses with fewer than 100 employees to take out a second PPP loan from the remaining funds.

20 Jun

Advice to Help You on Your Path to PPP Loan Forgiveness

With the passage of the Paycheck Protection Program Flexibility Act of 2020 (“PPPFA”), small business owners will enjoy greater flexibility and a relatively easier path to toward forgiveness of their PPP loan. For example, one of the key provisions within the PPPFA is that a small business owner remains eligible for loan forgiveness even if they do not rehire all of their employees that were furloughed or laid off in the midst of the Coronavirus pandemic.

The Treasury Department and Small Business Administration (the agency tasked with managing the Paycheck Protection Program), released new loan forgiveness forms that dramatically reduced the documentation needed to apply for PPP loan forgiveness and will give many small business owners more options and opportunities to achieve full loan forgiveness, according to a great article published by the New York Times.  For example, the new forms include a “safe harbor” option that enables small business owners to simply affirm they were not able to operate “at the same level of business activity” they had prior to the Coronavirus pandemic due to the requirements or safety guidelines of the state and/or federal government, including social distancing rules. With this new “safe harbor” provision in place, a small business owner remain eligible for full PPP loan forgiveness as long as they meet the other rules and regulations related to the PPP program, including the new requirement that at least 60 percent of their PPP loan money is used for payroll costs.

Positive Feedback from Business Community

The inclusion of a safe harbor provision to the PPP loan forgiveness application was widely hailed as a position step in helping the small business community. For example, the New York Times article question Albert J. Campo, an accountant in New Jersey who has worked with multiple small business owners throughout the Coronavirus pandemic.

“If you’re at 50 percent capacity, you can’t bring back your whole staff and pay them all. You just can’t,” said Mr. Campo to the New York Times. “This gives those borrowers flexibility.”

“This is a step in the right direction,” said Aimee Brierly to the New York Times. Mrs. Brierly is a spokeswoman for the Small Business Majority, an advocacy group.

“EZ” Firm for Self-Employed Business Owners

If you received a PPP loan and are self-employed or a partnership, you may be eligible to apply for loan forgiveness through a new, consolidated “EZ” form that does not ask for details about employee information or documents to substantiate your forgiveness application. Nevertheless, lenders still have the right to review and verify some your financial and business records.)

Access PPP Loan Forgiveness Docs Here

If you received PPP loan funds and want to apply for loan forgiveness, here are the relevant application forms:

 

4 Jun

Overview of the Modifications Made to the Paycheck Protection Program

Congress took a big step in modifying the problematic Paycheck Protection Program (commonly referred to as the “PPP Program”). This program was created as part of the multi-trillion dollar aid package to help Americans and small businesses in the midst of the Coronavirus pandemic.  However, the lack of clear guidance on how to administer the PPP Program by the Treasury Department and Small Business Administration led to a chaotic roll out and a number of large businesses gobbling up funds meant for smaller businesses hit hardest by the economic shut down brought on by COVID-19. The chaotic roll out was followed by an array of defects, oversights, and administrative burdens that rankled the business community. One of the biggest concerns raised by many business owners related to the administrative complexity and burden associated with seeking PPP loan forgiveness.

The numerous issues with the PPP Program prompted Congress to pass a series of “fixes” aimed at providing greater flexibility for small businesses in how they use PPP loan funds. The bill passed the House of Representatives on a 417-1 vote and cleared the Senate by voice vote. The legislation now heads to the President’s desk for signature.

Overview of some of the biggest modifications to the PPP Program

Current PPP borrowers can opt to extend the 8-week period to 24 weeks.

New PPP borrowers will automatically enjoy a 24-week period to utilize the loan funds. However, the covered period cannot extend beyond December 31, 2020.

The payroll expenditure requirement drops from 75 percent to 60 percent. However, PPP borrowers need to be forewarned that they have to spend at least 60 percent on payroll or none of the loan will be eligible for forgiveness. Currently, a borrower is required to reduce the amount eligible for forgiveness if less than 75 percent of eligible funds are used for payroll costs, but forgiveness isn’t eliminated if the 75 percent threshold isn’t met. Instead, there was a sliding scale on the amount that could be forgiven. The new legislation does not include a sliding scale, according to the Journal of Accountancy.

PPP borrowers are allowed to use the 24-week period to restore their workforce levels and wages to the pre-pandemic levels required for full forgiveness. This must be done by December 31, 2020.

New PPP borrowers now have five years to pay back the loan instead of just two year.

Existing PPP borrowers have the option to request a repayment extension to the 5-year period.

The interest rate on a PPP loan remains at 1 percent.

As you can see, there is never a dull day when it comes to the PPP Program. Some members of Congress even stated that additional “fixes” will need to be made after this series of fixes are enacted into law. Stay tuned.

1 Jun

Major Developments in the Paycheck Protection Program Pt. 2

In addition to new regulations governing loan forgiveness, another major development with the PPP program was the passage of legislation that would significantly modify key provisions within the program.  The U.S. House of Representatives, by a vote of 417-1, passed the “Paycheck Protection Program Flexibility Act.” This legislation aimed to address numerous concerns raised by small business owners since the passage of the CARES Act.

The PPPFA reduces the amount of the loan needed to be spent on payroll from 75 percent to 60 percent. This means you will be able to spend more of the PPP loan on rent, mortgage payments, utilities, and other expenses.

Other modifications contained within the House bill includes:

  • Lengthening the amount of time business owners have to use the PPP loan funds from eight weeks to 24 weeks.
  • Extending the deadline to rehire workers to from June 30, 2020 to December 31, 2020.
  • Lengthening the amount of time recipients have to repay the loan
  • Enable business owners to defer payroll taxes for loan forgiveness

Competing Legislation Working Its Way Through the Senate

The House bill will now be sent to the U.S. Senate for consideration. Minority Leader Sen. Chuck Schumer (D-NY) endorsed the House bill. However, Sen. Marco Rubio (R-FL), Chairman of the Senate Small Business and Entrepreneurship Committee, has thrown his support behind a different bill.

 

As you can see, it is important to stay tuned for potential dramatic changes to the PPP Program.

1 Jun

ALERT – Major Developments in the Paycheck Protection Program

There were numerous developments in the management and administration of the Paycheck Protection Program. The Treasury Department issued a series of new, and controversial, regulations detailing the steps necessary to qualify for loan forgiveness. and the U.S. House of Representatives passed a sweeping bill that would make major modifications to the PPP program.  So, if you have a PPP loan, make sure to read this article from start to finish.

Let’s start with the Treasury regs governing loan forgiveness.

If you are a business owner hoping to utilize a reasonable, straight-forward PPP loan forgiveness process, you are going to be disappointed. The new regs regarding PPP loan forgiveness have been described as harsh, overly complicated, and byzantine. Here are some of the key takeaways:

1. The SBA retains authority to review any PPP loan at any time they desire

The new regs state that the SBA maintains the authority to undertake a review, at any time, of the details of any PPP loan that was disbursed to a borrower.

2. It could take months to actually get your PPP loan forgiven

Once you file the forgiveness application with your bank, it will have 60 days to review it and let you know the amount of forgiveness. The bank will then notify the SBA of the amount of forgiveness and the SBA will have 90 days to approve the bank’s decision.

The SBA can request more information from the lender or the borrower directly and then will approve the amount in whole or in part. If the SBA determines a portion or all of the loan did not meet the guidelines for eligibility or forgiveness, it can request repayment of the loan or “pursue other available remedies.” The guidelines do not explain what these other remedies might be. Borrowers do have the right to appeal decisions rejecting forgiveness to the SBA.

3. Keep your PPP loan records

It is important to note the SBA now requires borrowers to keep all files and paperwork on PPP loans for six years. The regulation states:

“As noted on the Loan Forgiveness Application Form, the borrower must retain PPP documentation in its files for six years after the date the loan is forgiven or repaid in full, and permit authorized representatives of SBA, including representatives of its Office of Inspector General, to access such files upon request from the time of application.”

While not expressly stated, presumably the SBA may have six years to audit loans and potentially take action.

4. The burden falls on the borrower to calculate the amount of eligible forgiveness

The new regs make clear that the borrower has the burden of calculating the amount from your PPP loan that is eligible for forgiveness. Once you complete your calculation, the lender has the responsibility to make a “good faith” review of your forgiveness application.

5. Have Your Calculator Handy

Many borrowers may be surprised to discover that the amount of their loan eligible for forgiveness will be directly linked to having the same number of full-time employees as you did when you calculated your loan amount. In other words, the amount you can have forgiven will be reduced if there was a reduction in full-time employees.

Here is where a calculator (or an accountant) would come in handy. Traditionally, an employee who works 32 hours per week is considered to be a full-time employee. However, under the PPP program, a full-time-equivalent employee is required to work 40 hours per week. As a result, if you have an employee who is, let’s say, working 36 hours per week, they are not full-time and your PPP loan may need to be reduced as a result.

The SBA offers business owners two ways to calculate the amount of your loan eligible for forgiveness. You can treat a 40-hour-per-week employee as equaling 1 while calculating part-time employees as 0.5.

The other option is to calculate the actual number of hours worked by 40. So, for example, if you have an employee working 30 hours per week, they would count as 0.75, according to Forbes.com. This means you will need to add up your “part-time” employees to determine by what percentage your workforce was reduced (if any) and be ready to have your loan forgiveness amount reduced by that percentage.

Key Takeaway – Paycheck Protection Program May Become Known as the Painful and Problematic Program

The SBA’s new regulations seem to be designed to make loan forgiveness as difficult and stress-inducing as possible for business owners. You should probably hire a lawyer and accountant just to make sure your loan forgiveness calculation was accurate. It seems like the SBA does not understand that we are in the midst of a historic pandemic and business owners are having a difficult time simply staying afloat and do not have time to manage the tremendous administrative burden inherent in these new regulations.

If you have questions or need assistance, contact InSight Law. We stand ready to help.

1 Jun

ALERT – Major Developments in the Paycheck Protection Program

There were numerous developments in the management and administration of the Paycheck Protection Program. The Treasury Department issued a series of new, and controversial, regulations detailing the steps necessary to qualify for loan forgiveness. and the U.S. House of Representatives passed a sweeping bill that would make major modifications to the PPP program.  So, if you have a PPP loan, make sure to read this article from start to finish.

Let’s start with the Treasury regs governing loan forgiveness.

If you are a business owner hoping to utilize a reasonable, straight-forward PPP loan forgiveness process, you are going to be disappointed. The new regs regarding PPP loan forgiveness have been described as harsh, overly complicated, and byzantine. Here are some of the key takeaways:

1. The SBA retains authority to review any PPP loan at any time they desire

The new regs state that the SBA maintains the authority to undertake a review, at any time, of the details of any PPP loan that was disbursed to a borrower.

2. It could take months to actually get your PPP loan forgiven

Once you file the forgiveness application with your bank, it will have 60 days to review it and let you know the amount of forgiveness. The bank will then notify the SBA of the amount of forgiveness and the SBA will have 90 days to approve the bank’s decision.

The SBA can request more information from the lender or the borrower directly and then will approve the amount in whole or in part. If the SBA determines a portion or all of the loan did not meet the guidelines for eligibility or forgiveness, it can request repayment of the loan or “pursue other available remedies.” The guidelines do not explain what these other remedies might be. Borrowers do have the right to appeal decisions rejecting forgiveness to the SBA.

3. Keep your PPP loan records

It is important to note the SBA now requires borrowers to keep all files and paperwork on PPP loans for six years. The regulation states:

“As noted on the Loan Forgiveness Application Form, the borrower must retain PPP documentation in its files for six years after the date the loan is forgiven or repaid in full, and permit authorized representatives of SBA, including representatives of its Office of Inspector General, to access such files upon request from the time of application.”

While not expressly stated, presumably the SBA may have six years to audit loans and potentially take action.

4. The burden falls on the borrower to calculate the amount of eligible forgiveness

The new regs make clear that the borrower has the burden of calculating the amount from your PPP loan that is eligible for forgiveness. Once you complete your calculation, the lender has the responsibility to make a “good faith” review of your forgiveness application.

5. Have Your Calculator Handy

Many borrowers may be surprised to discover that the amount of their loan eligible for forgiveness will be directly linked to having the same number of full-time employees as you did when you calculated your loan amount. In other words, the amount you can have forgiven will be reduced if there was a reduction in full-time employees.

Here is where a calculator (or an accountant) would come in handy. Traditionally, an employee who works 32 hours per week is considered to be a full-time employee. However, under the PPP program, a full-time-equivalent employee is required to work 40 hours per week. As a result, if you have an employee who is, let’s say, working 36 hours per week, they are not full-time and your PPP loan may need to be reduced as a result.

The SBA offers business owners two ways to calculate the amount of your loan eligible for forgiveness. You can treat a 40-hour-per-week employee as equaling 1 while calculating part-time employees as 0.5.

The other option is to calculate the actual number of hours worked by 40. So, for example, if you have an employee working 30 hours per week, they would count as 0.75, according to Forbes.com. This means you will need to add up your “part-time” employees to determine by what percentage your workforce was reduced (if any) and be ready to have your loan forgiveness amount reduced by that percentage.

Key Takeaway – Paycheck Protection Program May Become Known as the Painful and Problematic Program

The SBA’s new regulations seem to be designed to make loan forgiveness as difficult and stress-inducing as possible for business owners. You should probably hire a lawyer and accountant just to make sure your loan forgiveness calculation was accurate. It seems like the SBA does not understand that we are in the midst of a historic pandemic and business owners are having a difficult time simply staying afloat and do not have time to manage the tremendous administrative burden inherent in these new regulations.

If you have questions or need assistance, contact InSight Law. We stand ready to help.