Note: The Paycheck Protection Program Flexibility Act (“PPP Flex Act”) was signed into law on June 5, 2020. The PPP Flex Act extends the availability of loans under the Paycheck Protection Program (PPP) and adjusts certain rules applicable to PPP loans. The information reflected here may therefore be outdated. We are working to update our resources to reflect these updates to the PPP, so be sure to check back soon. Please refer to the latest guidance from the SBA and Treasury to confirm current program rules and how they apply to your particular situation.
As of May 23, 2020, 4.4 million Payment Protection Program (PPP) loan borrowers have faced the tough decision to accept a loan without detailed guidance.
After all, PPP loans are intended to act as a lifeline for small businesses and other eligible organizations struggling to make payroll or stay afloat amid the coronavirus. They’re not supposed to be a burden. So these loans may be forgivable, in whole or in part, if borrowers meet certain requirements.
The Small Business Administration (SBA) continues to release new information about PPP loan forgiveness. Keep an eye on the SBA website for the most up-to-date information. In the meantime, if you’re wondering if a PPP loan is the right choice for your business, there are a few things you’ll want to consider.
We turned to Intuit’s in-house experts, Sarah Paul and Erik Rettig, to answer some of your most pressing questions. As Director of Global Public Policy and Regulatory Affairs, Sarah has boots on the ground in Washington, D.C. She leads a team in global public policy analysis and development. Erik specializes in Small Business Policy and Regulatory Affairs.
How can a small business owner know if a PPP loan is the right loan for their business? For some businesses, spending the majority of their funds on payroll costs might not be the right move. In that case, they may not be eligible for loan forgiveness, and the PPP loan will need to be repaid.
Sarah: I would direct small business owners or anyone looking to learn more about relief options to Intuit Aid Assist. It’s a free interactive tool that helps business owners, self-employed workers, contractors, and freelancers understand the various federal relief programs available and which might be the best fit for their business. Intuit Aid Assist allows businesses to assess their PPP loan eligibility, and estimate their PPP loan amount and potential loan forgiveness. This can help you determine whether or not this particular loan might be worthwhile.
Erik: For many businesses, speed is a consideration. Traditionally, SBA loans like the Economic Injury Disaster Loan can take more time to deploy. It could be 30 days before you see that money in your account. Applying for a PPP loan through a small lender or fintech company can put money in your account in a matter of days. If you need money to keep your employees on the payroll—and you need it fast—a PPP loan through a small lender or fintech company might be the way to go.
Can potential borrowers adjust the amount of the loan they’ve been offered? Some borrowers may want to borrow less money and apply for forgiveness at the end of eight weeks.
Sarah: Typically, borrowers can work with their lenders to adjust the loan amount up or down before accepting it. Borrowers will have to repay PPP funds they don’t spend during the eight-week covered period. Adjusting the loan amount can help mitigate the risk of having to repay leftover funds.
If their PPP loan isn’t forgiven in full, how should business owners plan to repay that money?
Erik: PPP funds that aren’t forgiven, for whatever reason, will have to be paid back at 1% interest with a 2 year-term. The first payment won’t be due for six months, but the loan will accrue interest during that time.
Can borrowers appeal the loan forgiveness decision if they don’t believe their lender has forgiven the correct amount?
Sarah: We don’t have detailed information about that at this time. We’re hopeful that the SBA will address issues like this in forthcoming guidance.
Erik: If you plan to accept a PPP loan, you should be prepared to track your spending carefully. Make sure you have all the documentation you need to apply for forgiveness when the time comes. The SBA has already released the forgiveness application. Take a look and make sure you can meet forgiveness requirements.
Do you think the forgiveness rules could change before June 30?
Sarah: Recently, we spoke with Sen. Marco Rubio (R-FL), Chairman of the Senate Committee on Small Business and Entrepreneurship, and Sen. Ben Cardin (D-MD), the ranking member of the Senate Committee on Small Business and Entrepreneurship. They indicated that the rules could become more flexible as time goes on, making it easier for borrowers to apply for and receive forgiveness. However, Sen. Cardin emphasized that borrowers should prepare to comply with the forgiveness rules as they stand today.
If a borrower has accepted a PPP loan but is having second thoughts, can they return the loan?
Erik: The deadline to return a PPP loan was May 18. At this point, if you’ve accepted the loan and gone through the process, you can’t give it back.
Will PPP loan recipients be public knowledge?
Sarah: Yes. The SBA has indicated that they intend to publish the list of all PPP loan recipients in the future.
To qualify for loan forgiveness, borrowers must maintain employees on the payroll and rehire any employees they laid off. But some employees may not be able or want to come back. Do businesses need to rehire the same employees they laid off or just the same number of employees?
Sarah: Businesses don’t need to rehire the exact same employees—just an aggregate number of employees. The SBA is aware that things may have changed for previous employees. They’re looking at the number of employees you had before and the number of employees you have when you apply for forgiveness.
Erik: You just have to make sure you have the same number of employees on the payroll by June 30, 2020, as you did between February 15, 2020 and June 30, 2019, or January 1, 2020 and February 29, 2020.
If a business has trouble hiring more employees, can they prove that and still qualify for forgiveness?
Sarah: I think that information is going to be forthcoming. According to recent guidance, the SBA plans to issue a new rule that will allow borrowers to exclude an employee from loan forgiveness calculations if the borrower made a good-faith offer to rehire and documented the employee’s rejection.
Where can business owners find more information?
Erik: The best place to start is the SBA or the U.S. Department of the Treasury. The Treasury has a great resource on frequently asked questions around PPP loans that is updated regularly. Of course, Intuit Aid Assist is a great source of information. So is the QuickBooks Small Business Help site. It’s always a good idea to check in with your accountant or financial advisor and work with your lender directly.
Regulations and guidance from the Small Business Administration (SBA) and the U.S. Department of Treasury on the PPP are evolving rapidly, so the information in this article may be outdated. Please refer to the latest guidance from SBA and Treasury to confirm current program rules and how they apply to your particular situation.
The resources described above are made available to businesses within the United States of America.
Given the large demand for additional authorized Paycheck Protection Program funds, not every qualified Paycheck Protection Program applicant will receive a loan.
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