Small business owners, self-employed workers and freelancers received some welcome news when Congress recently passed the Paycheck Protection Flexibility Act. This new law clarifies how businesses can qualify to have all or a portion of its Paycheck Protection Program (PPP) loan forgiven. Here is what you need to know:
December 31, 2020 is the New Deadline to Spend Loand Proceeds
When the PPP program was rolled out this spring, businesses were given 8 weeks after loan funding to use the loan’s proceeds if they wanted to qualify for loan forgiveness. That timeline has now moved to 24 weeks. Due to the extended stay-at-home orders and further assessment of the pandemic, the new deadline is now effectively December 31, 2020.
More Loan Proceeds Can Be Used for Non-Payroll Expenses
The original law required 75% of loan proceeds to be spent on payroll. For businesses with high cost of goods sold or who had trouble convincing furloughed workers to return to work, hitting this 75% threshold was problematic. The new law reduces the amount of loan proceeds required to be spent on payroll to 60%.
More Flexibility In Fully Restoring Workforce
Borrowers now have through December 31, 2020 to restore their workforce levels and wages to the pre-pandemic levels required for full forgiveness. There are three exceptions allowed for not having a fully-restored workforce by Dec. 31. Borrowers can adjust their loan forgiveness calculations because of:
- Employees who turned down good faith offers to be re-hired at the same hours and wages as before the pandemic
- Difficulty finding qualified employees
- COVID-19 related operating restrictions
What You Need to Do
Download EZ Application Form
If you are a self-employed worker, independent contractor or sole proprietor who has no employees, you may be eligible to use the EZ Loan Forgiveness Application.
Download Regular Application Form
If you aren't eligible to use the EZ Loan Forgiveness Application, then you'll need to complete the regular loan forgiveness application.
Stay in Contact...
Stay in contact with your lending institution about when and how to complete the loan forgiveness application