• Extension of the “Covered Period” during which expenses paid and incurred may be forgiven from eight weeks following disbursement of the loan to 24 weeks from loan disbursement, or Dec. 31, 2020, whichever is earlier. Borrowers who received loans before June 5 may elect to continue using the eight-week covered period to calculate forgiveness.

• Lowering the percentage of forgivable expenses that must be spent on payroll costs from 75 percent to 60 percent. This provision was clarified this past Monday by the US Treasury and SBA to mean that at least 60% of any forgiveness amount requested must be comprised of eligible payroll expenses (see sba.gov). If a borrower uses less than 60 percent of the loan amount for payroll costs during the forgiveness covered period, the borrower will continue to be eligible for partial loan forgiveness.

• Extension of the period over which employers may rehire or eliminate a reduction in employment, salary, or wages that would otherwise reduce the forgivable amount of a PPP loan to Dec. 31, 2020.  

• The forgivable amount will not be subject to reduction if, as compared to February 15, 2020, the recipient is (1) unable to rehire former employees and is unable to hire similarly qualified employees by December 31, or (2) unable by December 31 to return to the same level of business activity due to compliance with federal requirements or guidance related to COVID-19.

• Elimination of the six month payment deferral period provision. Instead, deferral of interest and principal payments now begins on the date loan funds are disbursed and continues until the SBA completes its processing of a forgiveness request and distributes forgiveness proceeds to the Bank; if forgiveness is not otherwise requested by a borrower, principal and interest payments will begin 10 months after the end of the Covered Period. Reminder: Interest will accrue on the outstanding balance of the PPP during the payment deferral period.

• Increase to five years the maturity of PPP loans that are approved by SBA on or after June 5, 2020.

• Elimination of a provision that made PPP loan recipients, who have PPP debt forgiven, ineligible to defer payroll tax payments.

• On Monday, June 8, 2020, The US Treasury and SBA indicated that the SBA will “promptly” issue rules and guidance, a modified borrower application form, and a modified loan forgiveness application implementing the changes outlined in the PPPFA.

• To make the forgiveness process a bit easier to manage, and to ensure that all SBA requirements are met, Village Bank is installing an on-line portal through which applications for forgiveness will be processed and SBA-required supporting documentation can be uploaded. We are busy incorporating the latest guidance into the portal.

• Given these changes and the anticipated additional guidance, Village Bank recommends that applications for forgiveness be delayed to ensure compliance with updated program requirements and availability of the on-line portal. A communication will be forthcoming over the next week regarding Village Bank’s in-take process for applications for forgiveness.

• In the interim, please continue to review the SBA’s documentation requirements (see sba.gov) for forgiveness and begin collecting this information. Provision of required documentation at the time of application will facilitate processing.