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Coronavirus Aid: Paycheck Protection Program Flexibility

The Paycheck Protection Program was signed into law on March 27, 2020 in response to the COVID-19 Pandemic. Administered through the Small Business Association, it aims to provide funding to small businesses during COVID-19.

Employers are eligible to borrow up to 2.5 times their monthly payroll up to $10 Million in order to maintain their workforce. All or portions of the loan may be forgiven if SBA Guidelines are followed.

Up to this point there have been many questions about the guidelines. How to calculate, what the money can be used for, and how to document everything for forgiveness. The Paycheck Protection Program Flexibility Act (PPPFA) extended the deadline to December 31, 2020.

Here are a few things the PPPFA have updated:

· An employer must use at least 60% of the loan amount for payroll costs (was 75%)

· Expenses allowed will be forgiven during the coverage period: Starting on date of loan origination and ending the earlier of 24 weeks or December 31 2020. (was 8 weeks)

Loan forgiveness amount is based on previous number of Full Time Equivalent Employees (FTE) compared to number of FTE at the end of the period – December 31, 2020. Also, a reduction in salary greater than 25% during the same period will reduce loan forgiveness. The PPPFA provides some additional flexibility so that an employer will not have a reduction in loan forgiveness under certain “good faith” efforts:

· Inability to rehire individuals, whose positions remained unfilled due to inability to hire similarly qualified.

· Inability to return to same business level prior to Feb 15, 2020 due to new federal compliance requirements of safety from DHHS and CDC (sanitation, social distancing, safety, etc.)

For complete details see CARES PPPFA Act Advisor from UBA.

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