On Wednesday, July 1, 2020, the U.S. House of Representatives passed a bill to extend the Paycheck Protection Program (PPP) application period by five additional weeks until August 8, 2020. The U.S. Senate passed the bill by unanimous consent on Tuesday, June 30, 2020, less than four hours before the PPP application window was scheduled to close with more than $130 billion in unspent loan money. It is expected that President Donald Trump will sign the bill into law this week. Members of the House and the Senate are expected to adjourn for the Fourth of July holiday and are scheduled to return in two weeks.
On Tuesday, June 30, 2020, the U.S. Small Business Administration (SBA), which oversees the program with the Treasury Department, had approved nearly 4.9 million loans for a total of more than $520 billion. At midnight on June 30, 2020, the SBA stopped accepting loan applications. The unexpected extension is intended to provide small businesses additional time to apply for the approximately $129 billion in PPP funding remaining.
In addition to the five-week extension for the PPP application period, U.S. Senators Kevin Cramer (R-ND), Bob Menendez (D-NJ), Thom Tillis (R-NC) and Kyrsten Sinema (D-AZ), members of the Senate Banking Committee, introduced the Paycheck Protection Small Business Forgiveness Act to streamline forgiveness of PPP loans for small businesses. This bipartisan legislation includes forgiveness for PPP loans of $150,000 or less if the borrower submits a simple, one-page attestation form to the lender. It also ensures the lender will be held harmless from any enforcement action if the borrower’s attestation contained falsehoods.
Approximately 85% of PPP loans would be eligible for this simplified loan forgiveness process. The approximately 3.7 million PPP loans of $150,000 or less account for 85% of all PPP approved loans, but only 26% of the PPP funds delivered. The cost of applying for forgiveness for a PPP loan of this size is $2,000 for the small business and $500 for the lender. The bipartisan legislation introduced could save small businesses $7.4 billion and banks nearly $2 billion.
As background, in early April, Congress created the PPP as part of the $2 trillion Coronavirus Aid, Relief, and Economic Security (CARES) Act. The PPP was launched to aid the U.S. economy and assist small businesses facing economic hardships created by the COVID-19 pandemic. The program provides forgivable loans of up to $10 million per borrower that small businesses and other qualifying entities can use to cover payroll and other select costs, including mortgage interest, rent, and utilities.
PPP loan recipients can have their loans forgiven in full if the funds were used for eligible expenses and other criteria are met. The amount of the loan forgiveness may be reduced based on the percentage of eligible costs attributed to nonpayroll costs, any decrease in employee headcount, and decreases in salaries or wages per employee.
Tarlow is Here to Help – Please Contact Us with Questions
Tarlow Partners and staff members are closely monitoring tax-related legislation and regulations, and new guidance from the SBA and the Department of Treasury. We will continue to send updates and communications about relevant news and changing guidelines.
We are readily available to assist business owners in submitting Loan Forgiveness applications. If you have any questions about interpreting these new requirements and maximizing PPP loan forgiveness, please contact your Tarlow advisor for assistance.