SIGNIFICANT CHANGES TO FORGIVENESS OF PPP LOANS
UNDER THE CARES ACT
Just yesterday, the Senate voted to approve significant changes to the provisions of the CARES Act calling for forgiveness of Paycheck Protection Program ("PPP") loans.
Under the original provisions, borrowers receiving PPP loans could apply to have the loan forgiven (in whole or in part) to the extent the borrower was able to use the proceeds of the loan for payroll costs, interest on secured loans, rent, and utilities over the course of the 8 weeks after the loan was funded. SBA guidance added the requirement that non-payroll costs would be limited to 25% of the total spent for purposes of calculating the amount of the loan to be forgiven (meaning that payroll costs had to total at least 75% of the amount spent). In addition, employers who had been forced to lay off workers were allowed to restore their workforce by June 30 to meet the program's standards for maintaining workforce and payroll and still receive loan forgiveness.
The latest bill changes these requirements. Employers will now have 24 weeks (or until the end of the year, whichever comes first) to use the proceeds of a PPP loan for payroll and the other allowable costs for the purposes of calculating the forgiveness amount. The deadline for restoring workforce is also extended to 24 weeks after the loan is received. And the portion that must be spent on payroll costs has been lowered from 75% to 60%, although it appears that if at least 60% is not spent on payroll costs, the loan will not be subject to forgiveness at all.
The bill has been sent to the President to be signed, but the final version has not yet been released. We will provide further updates on any other significant provisions contained in the new statute as well as any new regulatory guidance that may be issued.
Further Questions
?
The PPP loan program contains several other requirements and features. If you have further questions about the provisions discussed above, any requirement of the PPP loan program, or any other aspect of the CARES Act, please contact Scott Calhoun. You can e-mail Scott by clicking here.
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