CARES Act, Funding, Small Business

Is The Third Time The Charm?

Things in Congress have been relatively quiet of late, thank goodness. After the flurry of activity in March and April, May was a nice reprieve. However, May also brought with it an entire new set of questions to be answered.  We received the Payroll Protection Program Loan Forgiveness Application from the Small Business Association and the Final Interim Rules from the Treasury Department, but not a lot of answers to our burning questions.

Photo by Jon Tyson on Unsplash

We have the initial introduction of the CARES Act in March, the second round of funding in the end of April and the technical corrections published in late April. Now we have Paycheck Protection Program Flexibility Act of 2020 that is headed to the President’s desk and expected to be signed soon. Is the third time the charm? Will this law clear our questions and set our minds at ease?

It will at least give us more time to figure it out. Here are the major highlights of the PPP Flexibility Act:

Instead of having only 2 years to repay any unforgiven funds, the minimum term will be 5 years and the maximum will still be 10 years. There has been no change in the interest rate of 1%.

The covered period for forgiveness of the loan has been extended from 8 weeks from the origination of the loan to 24 weeks or December 31st, whichever comes first. This one is a huge relief for those companies who were able to get their funds in the first round of loans. Expanding this time frame gives businesses who were not able to be open, time to use the money for getting payroll going again.

It also means, that if you did not apply previously due to the time constraint of getting your employees back to work, now you have that option. This is a great benefit to salons, restaurants, and other service industries that may find themselves unable to reopen within the original time frame.

There is still an 8-week option for the forgiveness application. If a company chooses this option, I recommend contacting your lender as soon as possible to ensure they will be ready to process those applications.

There have been changes made to the Full-Time Equivalent requirement. Previously a company was required to maintain the same number of full-time equivalent employees, however this has been eased to allow the employer to show they have just cause for not maintaining that metric.

The 6-month reprieve from making any payments on the loan has been rewritten to read, no payments will be required “until the date on which the amount of forgiveness determined under… the CARES Act is remitted to the lender.” The current rule states that each lender has 60 days from the time of your application to approve and forward the application for forgiveness to the SBA. The SBA has 90 days to render it’s decision and remit the amount of the forgiveness to the lender. This time frame is still a little loose, but I am hopeful with the additional time more guidance will be forthcoming.

I saved the two biggest items for last!

There are new percentages for the allocation of the funds. The amount that is required to be spent on payroll has dropped from 75% to 60%, allowing for 40% to be spent on rent, mortgage interest, and utilities.

Employers are also no longer excluded from taking advantage of the employer tax deferral with the IRS. This one is an entire process that I will cover in a separate post.

So, what do you think? Is the third rewrite the charm?

I think that we have a more time to figure things out, but there are still several items we need more guidance on.

Stay tuned, there will surely be more to come!

You know where to find me. ~Amy

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