Yesterday, at approximate 7:00 PM EST, the SENATE approved HR7010. We are expecting President Trump to sign the Bill today.
Here are the highlights of HR7010, Changes to the Small Business PPP Loan Programs
Below is a summary of the changes to the Small Business PPP Loan Program. These modifications to the program require a new strategy but provide significant flexibility for a practice to reopen and rehire its employees and still be able to obtain maximum PPP Loan forgiveness. It is very important to realize that this will require a new round of guidance to be issued by the Treasury and SBA but provides time for them to issue updated information we will need, due to the extension of the program from 8 weeks to 24 weeks.
Changes to the PPP loan program:
1) 8 week covered period extended to 24 weeks
Practice tip: The PPP loan was based on 2.5 months, approximately 11 weeks, of payroll and you now have 24 weeks to spend it. This eliminates most of the challenges of the program and allows employees to be rehired when the practice is ready to open up.
2) 75% rule reduced to 60%
Practice tip: Due to the 24 week covered period, the new 60% rule should not be a problem. We are recommending that you spend 100% of the loan amount on payroll over the 24 weeks as that will make the Loan Forgiveness application process go much easier, because you will only need to attach payroll reports to support your forgiveness. However, if you spend less than 60% of the loan on payroll, you will have $0 (NONE) “no” loan forgiveness which is a drastic change from the previous 75% rule. So the takeaway here is, please spend at least 60% or more of your PPP Funds on payroll, so you can avoid this trap.
3) Rehire date moved from 6/30/20 to 12/31/20
Practice tip: Your practice now has until 12/31/20 to rehire employees back to the 2/15/20 level.
4) Required FTE goal for the rehire exemption is reduced if you are unable to rehire employees or business has declined due to HHS, CDC, or OSHA requirements regarding COVID-19
Practice tip: Continue to plan on rehiring your employees back by December 31, 2020. However, if guidelines (HHS, CDC and / or OSHA) are issued that restrict the number of employees you may have in the office, this should give the practice flexibility in adjusting staffing levels to a new normal. This exception is new and we will need new guidance to clarify it.
5) New PPP loans will have a minimum maturity of 5 years
Practice tip: The goal of the program has shifted back to trying to get 100% forgiveness. However if you do not obtain this, we believe you will need to contact your bank to modify the terms to the allowable 5 years. We recommend trying to avoid doing this unless absolutely necessary. Current PPP Loans will mature over the original 2 year period.
Indirect changes to the PPP loan program:
1) We still don’t know about:
- payments to related parties
- 2019 retirement plan contributions
- misc. other payments but they may not matter.
2) We assume the $15,385 per individual payroll limit will be increased to $46,154 but will need confirmation from the SBA. The $46,154 is the product of $100,000 / 52 weeks x 24 weeks = $46,154. We will need to confirm this.
3) As we predicted, the Original SBA Loan forgiveness application will be completely changed, as a result of the above changes.
4) Although utilities, health insurance, SUTA, and other small costs are still eligible, they become less important. Rather than worry about tracking small receipts (invoices / leases / canceled checks) , we are recommending focusing on the big items that are easy to show to the lender that will support the forgiveness application. Examples would be >>> payroll and rent.
5) Due to the December 31, 2020 rehire date, practices typically won’t be filing forgiveness applications until January 2021 at the earliest.
Example of 24 Weeks
Out of all of our clients, the earliest a client received their PPP Funds was on April 13, 2020.
So, for example, if you received your PPP Loan proceeds on April 13, 2020, your 24 weeks began on April 13th and will end on September 28, 2020. This will be your “covered period” in order to meet the 60% / 40% Test as outlined above.
Maryland Unemployment Issues
If you need any additional help, for…….
Your own unemployment claims, please call 410-949-0022 or email ui.inquiry@maryland.gov.
Employer related questions (not concerning your own claims) please email dluisides‑dllr@maryland.gov
Please e-mail us any questions you may have. Hopefully, these are the final changes to the PPP Process, but as we have seen, it could change again!
We are here for you!
Please stay well!
My best to all,
Allen
