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Maximizing Paycheck Protection Program Loan Forgiveness

NEW Fact Sheet

Maximizing Paycheck Protection Program Loan Forgiveness

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Paycheck Protection Program Update - 06/15/2020

As promised, we have kept a close watch on new legislation that affects the Paycheck Protection Program (PPP) and have an important update for you.

Recent legislation (titled HR7010) has passed, offering adjustments to PPP loans—particularly regarding forgiveness calculations. Key changes are as follows:

  • Covered time period extended—The period of time to use loan money has been extended from 8 to 24 weeks. This means that you have more time to apply funds to qualified expenses that maximize loan forgiveness.

  • Social Security payments deferred—Originally under the Cares Act, employers who received the PPP Loan could not also defer employer social security tax payments. HR7010 adjusted this. Now, any employer with social security payments due between March 27, 2020 and December 31, 2020 can pay half of the amount due by the end of 2021 and the remainder by the end of 2022.

  • Loan payment deferral extended—The original 6-month deferral for repayment of PPP loans has been extended to 10 months. Payments are only required on the amount of the loan that is not forgiven.

  • Payroll threshold adjusted—Originally, the Department of Treasury and the SBA determined that 75 percent of a PPP loan had to be used for payroll in order for the loan to be forgiven. The 75 percent threshold has been adjusted to 60 percent. In a statement on 06/08, Treasury clarified "If a borrower uses less than 60 percent of the loan amount for payroll costs during the forgiveness covered period, the borrower will continue to be eligible for partial loan forgiveness, subject to at least 60 percent of the loan forgiveness amount having been used for payroll costs." This means that borrowers are still eligible for partial loan forgiveness even if they use less than 60% of the loan amount for payroll costs.

  • Safe harbor date extended—The original Cares Act included safe harbor exceptions to restore or attempt to restore full-time employees and any pay reductions by June 30, 2020. These exceptions still exist, but the date to restore has been adjusted to December 31, 2020.

  • Loan term date extended—All new PPP loans effective after the passing of HR7010 will have a five-year term. Businesses that received a loan prior to the new legislation can adjust the loan term from two to five years. Individuals will need to work with their lender to amend loan terms.

We hope this update helps. Again, we will continue to closely monitor new legislation and inform you on the key changes that may affect your PPP loan.