Congress recently passed the Paycheck Protection Flexibility Act which is good news for small business owners, the self-employed workers, and freelancers. The Paycheck Protection Program (PPP) loan forgiveness law explains how a portion or all of a loan is forgiven for a qualifying business.
When the PPP program began, to qualify for loan forgiveness a business had just 8 weeks after loan funding to use the proceeds. However, with new assessments of the pandemic and the extended stay at home orders, the new deadline was extended to 24 weeks making the new deadline, December 31, 2020.
Any business taking the loans will now have until December 31, 2020 to restore the levels of their workforce and wages to the pre-pandemic levels for full loan forgiveness. The December 31st deadline only has 3 exceptions for not fully restoring their workforce, which are:
- Your Employees turned down good faith offers to be re-hired at the same hours and wages as before the pandemic.
- The COVID-19 related operating restrictions.
- A business has difficulty finding qualified employees.
Originally, the law required that 75% of the loan was to be spent on payroll. However, hitting 75% turned out be problematic for those businesses that have had problems convincing furloughed workers return to work or if the business has high cost of goods sold. This new law decreases the loan amount to a 60% requirement to be spent on payroll.
Borrowers with loans that do not qualify for loan forgiveness will have up to 5 years to repay the loan instead of the original 2 years with an interest rate of 1%. Your bank has 60 days to process your loan forgiveness application. The Small Business Association (SBA) has 90 days to process your request, making your first payment 5-6 months after your forgiveness application.
How to apply for the PPP loan:
- Download EZ Application Form. You may be eligible to use the EZ Loan Forgiveness Application if you are an independent contractor, a self-employed worker, or a sole proprietor with no employees.
- Regular application form download. For those not eligible to use the EZ Loan Forgiveness Application, you will need to download the regular loan forgiveness application.
- Contact your bank. Contact your lending institution to find out when and how to complete a loan forgiveness application.
- Consider reaching out to your legislators to let your voice be heard on how you were impacted and to share your story on your PPP loan experience as several U.S. Senators indicated that there will be more changes in the future regarding the program.
Do you have questions about the PPP Loan Forgiveness? At Summit CPA we offer multiple resources to assist and help your business grow. To find out how we can help, contact our office at (866) 497-9761 to schedule an appointment with our advisors.