New PPP Forgiveness Rules Could Mean More Applicants

YOUNGSTOWN, Ohio – With new rules in place for the forgiveness of loans through the Paycheck Protection Program, the regional director of the Small Business Administration expects to see an uptick in applications.

On Friday, President Donald Trump signed into law the Paycheck Protection Program Flexibility Act. The act lengthens the period businesses have to use funds to 24 weeks from the initial eight-week timeframe, lowers the amount of funds that must be spent on payroll to 60% and offers protections to businesses that are unable to rehire workers or find qualified replacements before the end of the year. 

For businesses whose request for forgiveness is denied, the term of PPP loans was extended to five years at 1%, up from the initial two-year period. Monday is the first day businesses can apply for forgiveness. 

“With this new guidance and the coverage period opened up to 24 weeks, it’s going to allow more businesses to relook at the program,” said Rob Scott, director of the SBA’s Great Lakes region during a conference call Monday. “They know they can spend 60% of the money sent on payroll and not be against a deadline. Before, they were looking at an eight-week period with June 30 as the dropoff date.”

Across the first two rounds of the Paycheck Protection Program, 131,887 Ohio businesses were approved for $18.1 billion. Nationwide, 4.5 million loans have been approved, totaling $511 billion. 

Roughly $150 billion remains in the PPP fund. As the second round of funding opened in late April, there were concerns that funding would run out in the first week, a fear that did not come to pass.

“There was no way for Congress, the president or us to know how long the pandemic would last. The eight weeks was looking into a crystal ball,” Scott said. “There are businesses that are probably in the same situation, where they’re waiting to see if they come out of this. They stayed on the sidelines and didn’t apply for the PPP.”

With the signing of the Paycheck Protection Program Flexibility Act,  the SBA and Treasury Department are working on creating new guidance, Scott said, which will likely be released in the coming days.

“The agency is now working with the Treasury Department to update all of our materials that we released on May 15 when it comes to PPP loan forgiveness,” he said. “We’ll probably issue new rules and guidance on a modified borrower application form and a modified loan forgiveness application in accordance with the new act.”

It remains to be seen if borrowers who have filed for forgiveness already will be able to request more money from the program.

“It’s unclear yet. The one thing they’re able to do through their lender is request more money if they have not filed for forgiveness yet,” Scott said, referring to a rule issued a few weeks ago allowing borrowers to request more funds through their initial application.

“If somebody gets a PPP loan, they can only get it once, but they can apply for an increase,” he continued. “If you give the money back and don’t spend money … I’d imagine you could go back, say ‘Now I can use it,’ and request that from the lender, who’d request it from the SBA and get those funds released.” 

With demonstrations taking place across the country in response to police violence sometimes damaging businesses, Scott said disaster recovery loans will be available through the Small Business Administration if a disaster area is declared by a governor. Currently, he said, the only states in his region working such declarations are Minnesota and Illinois.

Demographic data of PPP borrowers will be collected during the forgiveness application process, Scott said. In the initial application, the SBA didn’t require lenders to collect such information, but the forgiveness application will include standard demographic information.

“In the loan forgiveness application, there’s an optional section for folks to check if they’re minority, male or female and all the categories that you can fill out for demographics,” he said. “I think we’re going to have a lot more detailed information on the back-end with loan forgiveness because we’re requesting it.”

The full text of the PPP Flexibility Act can be read HERE.