When the latest PPP legislation passed last week, it eased a number of restrictions, making far easier for businesses to qualify for loan forgiveness. While the 75% requirement for payroll had been reduced to 60%, the original wording implied that this 60% level would be a “cliff,” below which no forgiveness at all would be given.
The SBA has made a clarification that says if a borrower spends less than 60% of their loan on payroll and related costs (state payroll taxes, group health insurance and retirement plans) it will still get some forgiveness. While the SBA or Treasury Department cannot change the statute that Congress passed, they appear to be signaling that a future version of the law will make this clear.
The statement further explains that borrowers can have full forgiveness of qualifying non-payroll expenses as long as they do not exceed 66-2/3% of the amount spent on payroll expenses.
This new statement also clarifies that only borrowers approved after June 5th will be entitled to a 5 year payback period instead of the original 2 years. Banks have the option to extend the loan period for earlier borrowers but it is completely at their discretion.
It is almost certain that further refinements and clarifications to these rules will emerge in the coming weeks.
While the changes all appear to be making the terms more favorable for borrowers, it’s still a complex process to document and work through the calculations while trying to ramp up your business. We are helping a number of businesses through this process and can help ensure you get every dollar you are entitled.