Good news! The latest regulations for the Paycheck Protection Program, created under the CARES Act, were signed into law on June 5, in order to ease the requirements for full forgiveness of the loans. Here are the main provisions of the
- The 8-week period for using the proceeds following distribution has been expanded to 24 weeks, or December 31, 2020 (whichever is earlier). Businesses can still apply for forgiveness after 8 weeks if they prefer.
- The amount of the loan required to be spent on payroll has been reduced from 75% to 60% though the list of forgivable expenses has not been changed from payroll costs and benefits, mortgage interest, rents and utilities.
- The repayment term for funds that are not forgiven has been expanded from 2 years to 5 years at 1% interest, and the first payment will be deferred for 6 months after the SBA makes a determination on forgiveness.
- The rehire deadline of June 30 has been extended to December 31, 2020, allowing employers more time to spend funds on forgivable payroll costs.
- Loan forgiveness will no longer be reduced for a reduced workforce (FTE or full-time equivalent count) if the borrower can show (1) that it unsuccessfully tried to rehire workers who were employed on or before 2/15/2020 and (2) that it is unable to return to the same level of business activity as it had before 2/15/2020 due to COVID-19 issues (social distancing, sanitization and other safety issues).
- Employers receiving PPP loans can now also take advantage of the payroll tax deferral program of the CARES Act, deferring their Social Security tax burden into 2021 and 2022.
The SBA is still authorized to audit any loan at its discretion. As we have stressed before, remember to DOCUMENT in DETAIL how the loan is expended!