he Small Business Administration’s Paycheck Protection Program will continue for another month after President Donald Trump signed a bill on Independence Day extending the program’s application deadline.
Business owners will now have until Aug. 8 to apply for PPP loans.
“I think what we’re witnessing is government trying to respond to the needs of business,” said SBA Senior Area Manager for Southern Arizona Steven Hart. “We’ve seen over time this program shift to a more accommodating process for small businesses.”
The extension comes after SBA and the Department of the Treasury announced more than $130 billion of the program’s $670 billion remained unspent by the June 30 deadline in their recently released PPP report. The average-size loan PPP recipients received was $107,000 and helped to temporarily fortify about 51 million jobs in the nation, according to the report.
Originally, the program was capped at $350 billion but that was soon raised after funds ran dry by mid-April. The president then signed an additional $480 billion relief package into law and the program resumed lending on April 27.
On July 6, the SBA also released the names of all PPP recipients that received greater than $150,000 in loans between the program’s start in April until June 30.
Last month, President Trump also signed a bipartisan bill easing guidelines for small businesses to qualify for the Paycheck Program Protection loan forgiveness option. The bipartisan law was in response to complaints that PPP guidelines were too strict and could inadvertently force owners to pay back the loan despite making attempts to adhere to the loan forgiveness rules.
Under the new guidelines, businesses will only have to spend 60 percent of their PPP loan on payroll needs, instead of previously stipulated 75 percent. The other 40 percent can go toward business expenses like rent, utilities and debt interest, Hart said. Also, businesses will now have 24 weeks to spend their loan money to qualify for the loan forgiveness program. Previously, businesses that accepted a PPP loan needed to spend the money within eight weeks of receiving it to be eligible.
“Business owners I work with are relieved by the fact that they don’t have to use the loan in eight weeks,” Hart said. “They now have 24 weeks, so it’s essentially been extended until the end of the year.”
The loan forgiveness application has also been streamlined, said Hart. What was once an 11-page document has now been reduced to four pages. Banks will be in charge of the loan forgiveness process, not the SBA, according to Hart.
Hart points out another change to the PPP program—businesses can potentially have their loan forgiven even if they can prove they were unable to rehire previous or new employees due to slow business. According to the new guidelines, an aspect of loan forgiveness is “based on reductions in full-time equivalent employees for borrowers that are unable to return to the same level of business activity the business was operating at before February 15, 2020.
However, Hart does stress, “businesses need to be rigid on keeping documentation” throughout the whole process until their loan is forgiven.
“Business should keep everything and more than they have ever expected because even though (the guidelines) have been simplified, they’re still extremely rigid,” Hart said.
Hart suggests using job-offer letters when attempting to recall old employees or tried to rehire new employees. They will need to prove the offer was refused by the potential employee to be eligible, he said.
“When it comes to hiring new employees or not being able to hire employees, they have to document they offered prior employees their job first. They’ll need to keep a copy of that offer letter and refusal,” Hart said. “When it comes down to asking for forgiveness that there are no surprises if they have the answers needed ahead of time.”