PPP Loan Forgiveness

Last week, The Treasury Department and Small Business Administration amended the rules of the government-backed Paycheck Protection Program known as the PPP loan. This was so that the majority of small business owners who received aid are able to get at least part of the money forgiven. The changes are a positive change for restaurant owners. But other business owners who were planning their loan forgiveness on the original guidance may be left with a sour taste in their mouths.

The original guidance was that forgiveness would be attained if 75% of the funds were used on payroll in an 8-week period and up to 25% for mortgage, rent, or utilities. From the start, it was unclear if that meant the whole loan was forgiven or just the specific percentage used on these expenses. 

Businesses got creative to meet that forgiveness criteria. For DCA Virtual Business Support, that meant we donated time to nonprofits to ensure that we kept our team working and attained that 75% required payroll. We’re glad we took this path and hope to keep the program going forward as a regular part of our company culture. For us it created a win-win situation.

Other companies took different paths. Some gave employees bonuses while others reduced hours but continued to give full pay to meet the 75% requirement in such a short period. Hence the aforementioned sour taste.

Now that the rules have changed, businesses who took a more conservative approach with what would end up being a 1% SBA loan if not forgiven have more time and options. So, for a quick and fast guide of what the new guidance is, look below to the chart:

Old GuidanceNew Guidance
Criteria must be met in an 8-week period from loan disbursementCriteria must be met in a 24-week period from loan disbursement
75% Payroll, amount of loan forgiveness reduces proportionately if 75% not met60% payroll required for loan forgiveness – if not met none of the loan is forgivable
25 % Rent, mortgage & utilities4% Rent, mortgage, & utilities
Converts to a loan, all or in part, if not forgiven @ 1% interest repayable in 2 years from loan dateConverts to a loan, all or in part, if not forgiven @ 1% interest repayable in 5 yeats
Requirement to rehire employees if they were employed before 2/15/20Requirement has been lifted if a good faith offer was made and declined. Also, employers have until Dec 31, 2020 to bring back laid of employees.

While there are more rules than those listed above, those are the major ones that have been modified. If you are looking for forgiveness, you can find the application on the SBA Website – well maybe. It appears the old application stating 8 weeks is what is still posted. We’ll keep you posted if we see an update.

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