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Clients and Friends,
After exciting news coming to PPP borrowers from passing the PPP Flexibility Act, the SBA has released additional guidance on a few unanswered questions in their most recent Interim Final Rules (IFR) scheduled to be published on June 19, 2020. We have detailed the clarifications below and are happy to share even more good news!
Minimum Maturity: The Flexibility Act provides an extension of minimum maturity of five years for loans made on or after June 5, 2020.
- The new IFR details that the minimum maturity of two years may be extended to five years if mutually agreed upon by the borrower and lender
- Those who applied before June 5, 2020 should check with their individual lender
Use of Funds: The Flexibility Act gives borrowers the option to select a covered period of 8 weeks (if applied before June 5, 2020) or the lesser of 24 weeks or December 31, 2020, and reduced use of payroll from 75% to 60% of loan proceeds.
- The IFR clarifies that you do not need to use 60% of the loan proceeds on payroll related expenses, but 60% of the eligible forgiven amount must be used on payroll
- You may receive full loan forgiveness if at least 60% of total loan proceeds are applied to payroll related expenses and up to 40% applied to mortgage and business interests, rent, and certain utilities.
Employee Compensation: Payroll costs include wages capped at $100,000 of annualized pay per employee as well as covered benefits for employees (but not owners):
- For a 24-week covered period, a maximum of $46,154 per individual
- For an eight-week covered period, a maximum of $15,385 per individual
- For an eight-week covered period, a maximum of up to $15,385 applies
- For a 24-week covered period, a maximum of up to $20,833 or 2.5 months’ worth (2.5/12) of 2019 net profit applies
New Forgiveness Applications: The SBA issued a new EZ loan forgiveness application and updated the original forgiveness application to account for the updates. The new EZ forgiveness application may be used by the borrower if they meet at least one of the below requirements:
- Are self-employed and have no employees; OR
- Did not reduce the salaries or wages of their employees by more than 25%, and did not reduce the number or hours of their employees; OR
- Experienced reductions in business activity as a result of health directives related to COVID-19, and did not reduce the salaries or wages of their employees by more than 25%
What does all this mean? A lot less action and effort tracking your expenses which will allow most businesses to maximize forgiveness simply through payroll at the end of the 24 weeks. While there may be additional updates or guidelines released, we are committed to sharing any new information as we see it come through. As always, if you or someone you know needs aid interpreting these guidelines and applying for forgiveness, please reach out to firstname.lastname@example.org and a member of Skytale Group will reach out to assist.