Major Changes Are Coming to Double Your PPP Loan, and Automatic Forgiveness

After acting decisively to support the economy in March, Congress has failed to agree on a subsequent round of spending. Key economic supports, like the $600 supplement to unemployment insurance payouts and a moratorium on evictions, were allowed to expire at the end of July. Presidential executive orders to continue certain protections are not likely to be very effective, resulting in a need for a more comprehensive legislative response. Should that be forthcoming, the Continuing Small Business Recovery and Payroll Protection Plan Protection Act recently introduced in Congress has wide support.

The Act is intended to correct problems with the current program while allowing many to qualify for new funds.  Those eligible for new money are businesses, certain non-profit entities, veterans organizations, tribal businesses, self-employed individuals, sole proprietors, and independent contractors or small agricultural cooperatives with 300 or fewer employees who have had a 50% or greater fall in receipts from the: (1) 1st quarter of 2019 to the 1st quarter of 2020, OR (2) 2nd quarter of 2019 to the 2nd quarter of 2020. The loan amount is almost identical to the original PPP program, capped at $2 Million, with limited exceptions allowing certain applicants to reach $10 Million.

The 8 to 24 week covered period during which a recipient has to spend sufficient amounts to receive forgiveness will now be selected by the recipient, starting on the day after the borrower receives the funds, and ending on any day selected by the borrower, but no later than December 31, 2020.

New categories of forgivable expenses are also being added, including payment for any software, cloud computing, human resources and accounting needs, certain payments pursuant to a contract for goods essential to a recipient’s current operations, and payments for personal protective equipment and adaptive investments to help a loan recipient comply with federal health and safety guidelines.

Borrowers with loans under $150,000 will not be required to submit the previously issued application and must simply attest to a good faith effort to comply with PPP requirements. In addition, borrowers who received PPP loans that could have received larger loans due to SBA Interim Final Rules issued after receipt of the loan can submit a request to increase the loan to the maximum amount that could have been borrowed under the most favorable rules. This will apply regardless of whether the sponsoring bank has filed a Form 1502 and will enable many seasonal businesses and entities taxed as partnerships to borrow more at this time.  

Let us know if you have any questions on the PPP or this new legislation’s potential effect on your business.

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