President Trump signed H.R. 7010 on June 5, which modifies the original CARES Act in an attempt to make the Paycheck Protection Program (PPP) more accessible to small business owners. Let’s take a look at the changes and how they impact your business during these stressful economic times.
New Language in H.R. 7010
- Partial loan forgiveness is still in place under a new 60% threshold.
- June 30, 2020 is the last date when a PPP loan application can be approved.
- Minimum maturity of five years for a balance after forgiveness.
- Payments begin 10 months after the last day of the covered period unless a deferment is requested.
- The covered period extended from 8 weeks to 24 weeks. This will greatly benefit businesses who are close to the end of their 8-week period and have yet been unable to fully reopen their business.
- To qualify for forgiveness, 60% of the loan must be used to cover payroll. The remaining 40% can be used for other business expenses such as rent or utilities.
- Loan forgiveness has been extended to December 31, 2020, to allow employers to rehire or preserve current salaries.
- Allows borrowers to take advantage of payroll tax deferral.
On the surface, these changes seem positive, but recipients of PPP must be aware of some potentially troublesome areas. For instance, if a borrower fails to use 60% of the loan for payroll purposes, the loan is not eligible for forgiveness. If a business owner is unable to fully operate after the pandemic, this may be difficult. There is also ambiguity concerning self-employed individuals who have no employees.
While the changes made through H.R. 7010 are positive, the language can be confusing. If you have questions regarding how to receive PPP funding or are concerned with the new language, contact CSI for a consultation. We can walk you through the process and help relieve the stress.
Please do not hesitate to call our team for further information. We will be distributing application instructions as appropriate and when available.
To see more updates like this, especially those that impact small businesses, follow us and visit CSI’s COVID-19 (Coronavirus) Resource Center.