More Leniency in Loan Forgiveness Revisions

Jun 25, 2020

New revisions to the Paycheck Protection Program under the CARES Act have been expedited to be effective immediately as of June 5th by the U.S Treasury department to relieve additional economic loss from coronavirus (COVID-19). These revisions were signed in by the President to amend the CARES Act with the Flexibility Act. The new interim rules relax the loan terms and forgiveness guidelines. 

Flexibility Act

The loan maturation date has been extended to a minimum of five years after the date it is filed. Any amount of the loan that is not forgave must be paid by that date. On top of an extended payback period, there is now a longer covered period of 24 weeks instead of eight weeks. This flexibility allows the employer more time to disburse the funds to employees. 

This leniency is also reflected in how borrowers disburse their funds. They must use 60 percent of the PPP funds for payroll during the counted weeks compared to 75 percent prior to the amendment to be granted full forgiveness. Borrowers who filed prior to June 5th may also receive this extension by meeting with your lender before filing a forgiveness application. 

Receiving  Forgiveness

Filing for a PPP loan is just the beginning to utilizing the funding to its full potential. Properly using the money, documenting your payroll expenses and working with your lender are all necessary to receive forgiveness without facing reductions. A borrower will be denied forgiveness if they fail to meet the guidelines reported in the CARES Act. It’s imperative to stay ahead of this process because if a borrower fails to apply for forgiveness within 10 months of the last covered period day, they must begin paying 10 percent principal plus interest.

Borrowers are eligible to submit a forgiveness loan once all of the loan proceeds have been spent. At this point, they have until 10 months after the eight or 24 week period to finish the submission. This window at a minimum of one year to a maximum of a year and six months is attainable as long as you keep proper documentation. 

Along with the Calculation Forgiveness Form, applicants will need to submit payroll and non payroll expenditures, a receipt of the borrower’s certification form for PPP which is located in the SBA form or the  lender’s equivalent form. The PPP Borrower Demographic Information Form is required as well if it was previously submitted to the lender. Paid and incurred expenses during the covered period may only be counted once. The SBA provides step by step instructions to assist you in filling out the Calculation Forgiveness Form.

It’s important to provide your lender with as much information as possible because they will use only the provided resources unless the calculations are in question. If a borrower’s loan meets the criteria for full forgiveness, the PPP loan will be marked “paid in full.” Click here to view a list of participating lenders in each state.