In case you missed it, the Paycheck Protection Program Flexibility Act of 2020 was signed into law on June 5, 2020. That legislation created many borrower-friendly changes to the PPP program. You can read about those changes here.
Today we’re covering all the important updates you may have missed since the PPP Flexibility Act was signed.
A Potential Snafu If You Choose The 24-Week Period:: While the Paycheck Protection Program Flexibility Act has been generally billed as borrower-friendly, it isn’t without potential traps for borrowers. For example, borrowers should think hard about whether to elect the 8-week or 24-week “covered period” for the loan. While the 24-week period provides ample time to use PPP funds on eligible expenses (payroll, utilities, etc.), it also requires businesses to maintain their staffing levels for 24 weeks (instead of 8). This may pose a challenge to some businesses, particularly those with seasonal workforces.
The SBA Continues To Update PPP Guidance:: The federal Small Business Administration (also known as the SBA), which oversees PPP loans, has continued to issue guidance and regulations on PPP funds, even after the PPP Flexibility Act was signed. This is particularly challenging for borrowers because in many cases they’re required to follow this guidance even if it was released after their loan was disbursed. For borrowers, this means the obligation to keep up with the “rules about PPP money” is ongoing if they want to ensure eligibility for loan forgiveness.
Borrowers Must Document Compliance & Prepare For SBA Review:: SBA has broad authority to investigate any borrower’s use of PPP money regardless of the amount received. This means all PPP borrowers face the potential of review by the SBA including a trial-like hearing in front of an Administrative Law Judge.
Borrowers also are reminded that review by the SBA may not take place right away. Borrowers must therefore keep documentation of their compliant use of PPP funds for a minimum of six years after the loan is forgiven or paid in full.
Updates To The Application For Loan Forgiveness:: SBA has updated the forgiveness application so that it’s consistent with the PPP Flexibility Act. The up-to-date application for forgiveness is available here.
SBA also created a simplified application for forgiveness for certain eligible borrowers. Borrowers may used the simplified or “EZ” application if the borrower:
- is self-employed and has no employees;
- didn’t reduce the salaries or wages of their employees by more than 25% and didn’t reduce the number or hours of their employees; or
- experienced reductions in business activity as a result of health directives related to COVID-19, and didn’t reduce the salaries or wages of their employees by more than 25%.
The simplified or EZ application for forgiveness is available here.
If you’re a PPP borrower and have questions about whether you’re complying with all the guidance and regulations for your loan, contact us. Our experienced attorneys are happy to coach you through the challenges.
If you haven’t received a PPP loan and you’re interested in applying, contact your lender right away. PPP funding is limited and the absolute last day to apply is June 30, 2020.
