As states across the US are starting to reopen, the Payment Protection Program has been a saving grace to thousands of businesses. It has helped prevent a full-scale employment crisis across the country as companies could continue paying employee wages.

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The subsidy, however, is far from being a free lunch. Besides the principal value of the loan, employers need to pay an additional 1% interest upon its maturity. Businesses also need to consider the maximum amount they are eligible to borrow from the government. 

These rules are also subject to changes by government agencies such as the U.S. Small Business Administration (SBA). You can read more about the latest regulations and policies regarding PPP loans with this article by Ken Tysiac on the Journal of Accountancy last June 28, 2020.

New PPP guidance addresses maturity dates, loan amounts

Updated Paycheck Protection Program (PPP) guidance issued Thursday and Friday by the Treasury Department and the U.S. Small Business Administration (SBA) addresses PPP loan maturity dates for all borrowers as well as maximum loan amounts for certain self-employed individuals. 

All of the updates were designed to reflect the Paycheck Protection Program Flexibility Act of 2020, PL 116,-142, which became law June 5 and made significant changes to the PPP. Click here to read more…

Fortunately, the government understands that not all businesses may be able to repay their loan. Hence, the government allowed its forgiveness for companies that can pass some qualifications. These qualifications include paying and retaining your employees for a set period. Employers also must allocate at least 75% (now down to 60%) of the loan to salary expenses. 

Borrowers of the Payroll Protection Program also have 24 weeks to spend their loan amount to qualify for the forgiveness. Those that wish to apply for loan forgiveness before the end of this period may do so under certain conditions. 

Employers that apply for early forgiveness lose their right to PPP’s safe-harbor provision. This provision allows companies to provide lower salaries until December 31, 2020 without losing their option for full forgiveness. Early applicants also need to pay any wage reduction in excess to the 25% threshold. Read more about this topic in this article by Jeff Drew on the Journal of Accountancy last June 24, 2020. 

PPP recipients can apply early for loan forgiveness, SBA says

New Paycheck Protection Program (PPP) guidance released Monday night declares that PPP recipients can apply for loan forgiveness early but that doing so could cost them money.

In a 34-page interim final rule (IFR) issued in consultation with Treasury, the U.S. Small Business Administration (SBA) addresses a number of issues related to the PPP, which was created by the Coronavirus Aid, Relief, and Economic Security (CARES) Act, PL 116-136, to provide forgivable loans to small businesses, not-for-profits, and certain other entities hurt by the economic impacts of the COVID-19 pandemic and associated government-imposed quarantines. Click here to read more…

Application for the loan is also fairly straightforward. Business owners need to secure and accomplish a Form 3508EZ from the SBA’s website. Employers then need to submit this form to their SBA-accredited lender. A complete list of these lenders can be found on the website of SBA.

If you have any questions regarding the CARES Act and Payroll Protection Program’s application and guidelines, you can reach any of our expert financial advisers here at Aldaris CPA. We also offer top-notch accounting services to businesses and individuals across the Seattle area. Book an appointment now!