By: PayMaster, Inc
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The SBA and U.S. Treasury posted a joint statement on Monday with new information on the PPP to clarify confusion on the Act that was passed just days before. Never a dull week in payroll.
There was uncertainty in the language used in the PPP Flexibility Act whether any of the loan would be forgiven if less than 60% was spent on payroll. They have clarified that it will be a sliding scale if you use "less than 60 percent of the loan amount for payroll costs during the forgiveness covered period, the borrower will continue to be eligible for partial loan forgiveness, subject to at least 60 percent of the loan forgiveness amount having been used for payroll costs."
To translate that, you take the amount you spent on forgivable ‘payroll costs’ and divide it by .6, and that is the amount that is forgiven. For example, if your loan amount was $20,000 and $10,000 was spent on payroll costs, then divide $10,000 by .6 and arrive at $16,666.67 forgiven. $3,333.33 would be repaid. With the new 24 week period to basically spend 60% of what you averaged in an 8 week period, I will find it hard to imagine anyone not achieving 100% forgiveness based on the spending requirement. Keep in mind that you still need to meet the FTE and Wage Reduction limit requirements.
The increase to five years for the maturity of PPP loans that are approved by the SBA on or after the signing of the Flexibility Act, June 5, 2020. This would appear to mean that if you have an unforgiven amount on a loan that was approved before this date, you will be limited to the original two year repayment.
While there are currently funds still available under the PPP, they have set the final date for loans that will be approved as June 30, 2020.
