​Some Good News for Businesses with PPP Loans

The Small Business Administration announced some significant changes that should benefit businesses with PPP loans.

First up: Promissory Notes. For some quick background, last summer, the Paycheck Protection Flexibility Act of 2020 extended the deferral period for PPP loan payments.

That deferral period would be either:

• The date the SBA remits the borrower’s loan forgiveness amount to the lender, or
• If a borrower opts to not apply for forgiveness, 10 months after the end of the borrower’s loan forgiveness covered period.

In guidance issued this week, the SBA clarified that the deferral extension applies to all loans. It also says there’s no requirement that the promissory notes have to be modified to reflect the new deferral period.

Secondly, there’s now a simplified loan forgiveness app for businesses with loans that are less than $50,000.

There are a couple of criteria for using the simpler app. Borrowers with PPP loans under $50,000 don’t have to reduce their amount eligible for forgiveness if:

• They reduce the salary or hourly wage of an employee earning less than $100,000 in 2019during the covered period relative to the first quarter of 2020, or
• They reduce full-time equivalent employees during the covered period relative to a base period.

Although these new criteria seem to run counter to the PPP’s intent — since employers can now reduce their employee count or cut their employees’ hours — it does simplify the application process for those with smaller loans.

The SBA also recently issued guidance about mergers and acquisitions when one of the companies has a forgivable PPP loan. In those situations, both parties should be prepared for more scrutiny during due diligence, as well as timeline delays and implications about the company’s value.

If you need help with your business’s PPP loan forgiveness, we have a tool for that.

This communication is intended to provide general information on legislative COVID-19 relief measures as of the date of this communication and may reference information from reputable sources. Although our firm has made every reasonable effort to ensure that the information provided is accurate, we make no warranties, expressed or implied, on the information provided. As legislative efforts are still ongoing, we expect that there may be additional guidance and clarification from regulators that may modify some of the provisions in this communication. Some of those modifications may be significant. As such, be aware that this is not a comprehensive analysis of the subject matter covered and is not intended to provide specific recommendations to you or your business with respect to the matters addressed.