To our Valued Clients and Associates,
Yesterday, the Senate approved the bill H.R. 7010 that had passed the House last week. The Bill now heads to the President for signing. For borrowers under the PPP loan program, H.R. 7010 provides some much-needed relief. Highlights of the bill are as follows:
- Extension of the covered period from 8 weeks to 24 weeks from the date of the loan or December 31, 2020, whichever is earlier. This is critical for many businesses as it will allow them additional time to incur forgivable costs. It is not clear if the maximum allowable forgiveness for an employee making over $100,000 will be $46,153 (24/52), but hopefully guidance is forthcoming to clarify.
- The bill increases the non-payroll cost cap to 40%, this was previously 25%. However, be aware, the bill states that “to receive loan forgiveness under this section, an eligible recipient shall use at least 60% of the covered amount for payroll costs…” The new bill creates a cliff whereby if you do not spend 60% of the loan proceeds on payroll, then none of the loan will be forgiven. The SBA is being urged to address this favorably in regulations, so stay tuned.
- The deadline for replace FTE’s/restore salaries has been extended from June 30, 2020 to December 31, 2020.
- Businesses that remain partially or fully closed through 12/31/20 have additional relief. If these businesses are able to document that (1) there was an inability to rehire individuals, or (2) an inability to rehire similarly qualified employees, or (3) there was an inability to return to the same level of business that existed before February 15, 2020 due to compliance with government orders, then the amount of loan forgiveness will not be reduced by a loss of FTE’s under the above scenarios.
- The bill does not require you to adopt the 24-week covered period. If you do not need the additional time, you can elect to use the 8-week period instead. This will allow those businesses the ability to apply for forgiveness sooner.
- The loan repayment period for unforgiven loans is extended to 5 years for loans made after passage of the bill.
It is anticipated the bill will be signed by the President quickly and we are anticipating additional guidance will be issued as soon as that happens. As always, we will advise you of any additional guidance as it becomes known. If you have any questions, please contact us directly.
We hope you are all doing well and staying safe.