April 28, 2020
The interest rate on PPP loans is only 1% which makes it attractive for some businesses to get a PPP loan and use the money to reopen, retool, or innovate. Even so, these businesses are taking a risk that enough money will be available to repay the loan within the required two-year period. Others are hording the money just in case they need it and will return the funds when they are required to do so.
Nearly 1.7 million businesses received $350 billion in the first round of the PPP. The second round of PPP funding opened yesterday. It is expected that $320 billion will be disbursed by banks through the SBA in a few days.
Loan recipients have eight weeks to show that at least 75 percent of the money was used for payroll. Their entire loan could be forgiven after providing payroll statements and other documentation to their lender.
Stay-at-home orders are preventing many businesses from reopening, so they do not need to rehire employees. Unless businesses can reopen, there may not be enough time to spend PPP funds on payroll within eight weeks. Some businesses are planning to use the money for other reasons which defeats the whole purpose of the PPP.
It is expected that the Treasury will issue the final rule on the certification process for how businesses can have their loans forgiven soon. This likely to happen when t
he SBA announces the depletion of the $320 billion of PPP money.
Washington's intent was to help small businesses keep workers on their payroll. Small businesses employ 59 million of the nation's 160 million workers. Although the intention was good, the money is running out quickly and there might not be enough time to bring employees back to work. Because of this, the PPP loan has many things companies need to consider as they seek forgiveness.
I am presenting a webinar on PPP loan forgiveness this Friday, May 1 at 11:00 AM.
Click here
to register.
We will share more details as they become available. Please visit our
COVID-19 Resource Page
for more updates.
Feel free to contact any member of our team at (610) 828-1900 (PA) or (732) 341-3893 (NJ) with questions. Rich Higgins, CPA, managing principal – New Jersey office can be contacted at
Richard.Higgins@MCC-CPAs.com
. I can be reached at
Marty.McCarthy@MCC-CPAs.com
. As always, we are happy to help.
Stay safe,
Marty McCarthy, CPA, CCIFP
Managing Partner
McCarthy & Company
Disclaimer: This alert is for informational purposes only and does not constitute professional advice. Information contained in this communication is not intended or written to be used as tax advice, and cannot be used by the recipient to avoid penalties that may be imposed under the Internal Revenue Code. We strongly advise you to seek professional assistance with respect to your specific issue(s).
