Lawmakers Add Major Enhancements To PPP Loan Forgiveness Program For Small Businesses

The president signed into law today a bipartisan congressional bill which enhances the Payroll Protection Program (PPP) forgiveness program by tripling the time for wage loan forgiveness and increasing the amount of non-wage expenses which can be forgiven, among other things.

READ: Stimulus Bill: Making Sense Of The Options For Small Businesses & Employers (Grants + Loans)

A few key elements of the bill:

Previously you could only get loan forgiveness for 2 months of payroll and other expenses. Now, they’ve increased that to 6 months, tripling the amount of loan forgiveness possible with the program.
- Note, total loan amount that each business is eligible has not changed, and you obviously can’t get forgiven more funds than the full amount of the loan. A lot of businesses were not able to use all the loan funds within 2 months on eligible expenses, and this change gives them three times the amount of time to do so.
- Final date to use funds and get loan forgiveness is December 31, 2020. Thus, any PPP loan money received in July will not get the full 6 months to use the money. But any loans received by the end of June will have a full 6 months from receipt to use the money.
Previously you could only get forgiveness if you used 25% or less on non-payroll expenses. Now they’ve changed that, and you can use up to 40% on non-payroll expenses.
- For example, suppose you want forgiveness for two employees payroll and for your rent cost. Your rent cost is $40,000 over the course of 6 months and your employee cost is $60,000 over the course of 6 months. Previously, you would only be eligible for $75,000 of forgiveness whereas now you’ll be eligible for the full $100,000 of forgiveness.
You can rehire workers anytime before the end of 2020 and still be eligible for loan forgiveness; previously the deadline was June 30.
- This is huge since a lot of businesses don’t have much work now and have fired/furloughed their employees (and put them on unemployment) until things pick up. With this new measure, a lot of businesses will be able to bring back their workers, say, in two months, and still be eligible for loan forgiveness.
- Just keep in mind, all money spent to get loan forgiveness must be completed by end of year, so if you bring your employees back in December, you’ll only end up getting 1 month of forgiveness.
- The new law also eases some of the rehiring requirements for certain instances where the business was unable to rehire workers.
Separately, the new law also extends out the loan time for the parts which are not forgiven from 2 years to 5 years at the same 1% interest. This is only for those who borrowed after June 5th.

Disclaimer: Please do your own research. It’s possible some of this information isn’t written with perfect accuracy. Just trying to convey some basic ideas here.

Also worth noting a negative element of the bill which is that you mess up and don’t spend at least 60% on payroll, you get no forgiveness at all. (Previously, you were still eligible for partial forgiveness if you spent less than 75% on payroll.) Update: apparently, the SBA does not plan on enforcing this. So you should be able to get partial forgiveness if you spend less than 60% on payroll.

When the CARES Act initially passed, I wrote an article evaluating the different options. This change makes the PPP option much more enticing for many people, and some of the analysis given there will change with the new legislation. PPP money is still available, so you can still apply now and get full benefit.

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