Updated July 7, 2020 3:00 PM CT
Over the last few months, several programs were announced to help small business owners who had to reduce or stop operations at the onset of the pandemic. If you are a small business owner who is unsure about your best course of action, please talk to your Business Banker — they will help you assess the options that are currently available based on your situation.
Paycheck Protection Program (PPP) Loan
The Paycheck Protection Program is a loan designed to provide a direct incentive for small businesses to keep their workers on the payroll. The program is administered by the U.S. Small Business Administration (SBA). The SBA will forgive the loans if all conditions of the program are met.
Early in June, the PPP Flexibility Act was passed into law that made some significant changes to the program. Since that time, there have also been several other rule changes that impact the forgiveness phase of the loan program. Some of the most important changes are as follows:
- The maximum non-payroll portion of the loan that would be eligible for forgiveness changed from 25% to 40%. (The minimum amount used for payroll expenses changed from 75% to 60% to qualify for forgiveness.)
- The Covered Period to use loan proceeds is now 24 weeks for all loans. If the loan was issued prior to June 5, 2020, the borrower can elect to use the original Covered Period of 8 weeks to use the loan proceeds.
- Regardless of whether the borrower chooses the 8-week or 24-week Covered Period to use the loan proceeds, once all loan proceeds have been used, the borrower is eligible to apply for loan forgiveness, even if the Covered Period has not ended.
- The loan payment deferral period changed from 6 months to 10 months after the end of the Covered Period of the loan. If the borrower does not apply for loan forgiveness within the 10 months after the Covered Period for the loan, the loan payment deferrals will cease and monthly principal and interest payments will become due to the bank to pay back the loan proceeds.