By SEMA Washington, D.C., Staff
The U.S. Congress passed a bill to extend the deadline for businesses to apply for Payroll Protection Program (PPP) loans to August 8. The application deadline was June 30, but the program still has about $130 billion available for lending. President Trump is expected to sign the bill into law. The U.S. Small Business Administration (SBA) has a “Find Local Lenders” page to help locate the nearest PPP lending institutions.
Lawmakers recently enacted the PPP Flexibility Act to provide companies more options on how funds are used. Highlights include:
• Loan Amount: PPP loans equal the average of one month’s 2019 payroll multiplied by 2.5 (capped at $10 million).
• Amount Forgiven: The SBA will forgive that portion of the loan used to cover payroll, rent payments, mortgage interest, and the cost of utilities for a fixed period-of-time. As a result of the PPP Flexibility Act, the employer may now choose the covered period, either: (a) 8 consecutive weeks from when the loan was received, or (b) up to 24 weeks from when the loan was received or on Dec. 31, 2020, whichever comes first.
• Use of Funds: PPP funds can be used to cover payroll, mortgage or rent payments, utilities and other specified expenses. At least 60% of the amount to be forgiven must be spent on payroll, which includes employee benefit costs for vacation, sick/parental leave, insurance premiums, retirement benefits, and state and local taxes.
• Interest Rate and Repayment Terms: The loan interest rate is 1%. Repayments on any amount not forgiven is deferred at least 10 months after the end of the covered period, with a two-year term for loans secured before June 5 and five-year term for loans on or after that date.
• Rehiring Workers: Employers have until December 31, 2020 to rehire workers and have their salaries count towards forgiveness.
• Payroll Taxes: Businesses receiving a PPP loan may also defer payment of 2020 payroll taxes.
• Forgiveness Application: The SBA has created two applications for seeking loan forgiveness, a standard form and an EZ version which requires fewer calculations and less documentation.