Key changes to PPP and loan forgiveness

Updated: June 19, 2020

In June 2020, several significant changes were made to the SBA’s Paycheck Protection Program (PPP). Here are the key changes we wanted you to know about:

  1. Your business now has 24 weeks to spend PPP loan funds (up from the original 8 week period). Importantly, you are still allowed to use the original 8-week period if you prefer for your forgiveness application.
  2. Your business now must use at least 60% of PPP loan funds on payroll (down from the original 75% requirement for payroll). The remaining 40% has to be spent on approved non-payroll expenses.
  3. The deferral period for payments of principal, interest, and fees on PPP loans has been deferred to the date on which the SBA remits the loan forgiveness amount to the lender, or, if you do not apply for loan forgiveness, 10 months after the end of your loan forgiveness covered period.
  4. You now have until December 31 to fill positions if you’ve had layoffs. The prior timeframe was June 30 to rehire or fill vacant roles created due to layoffs.
  5. Additionally, there are new exceptions to the program’s rehiring requirements. If your business is unable to fill vacant positions, you can still qualify for forgiveness on payroll amounts if you are able to document one of the following:
    • An inability to rehire any individual who was your employee on or before February 15, 2020, and an inability to hire a similarly qualified employee for each such unfilled position on or before December 31, 2020; or
    • Your business has been unable to return to your pre-February 15, 2020 level of business activity due to compliance with certain government requirements for sanitation, social distancing, or any other worker or customer safety requirement related to COVID-19.
  6. If any portion of your loan is not forgiven, it will convert into a term loan and your business must pay principal and interest. Under the recent Flexibility Act, if your loan was approved by the SBA on or after June 5, the term of your loan will be 5 years on the unforgiven amount; if your loan was approved by the SBA prior to June 5, the term of your loan is 2 years on the unforgiven amount, but can be extended to 5 years at your request.
  7. The SBA rolled-out new forgiveness applications incorporating recent amendments made by the SBA, including, the introduction of an EZ application. Borrowers can use the EZ application if they meet one the following requirements:
    • Are self-employed and have no employees; OR
    • Did not reduce the salaries or wages of their employees by more than 25%, and did not reduce the number or hours of their employees; OR
    • Experienced reductions in business activity as a result of health directives related to COVID-19, and did not reduce the salaries or wages of their employees by more than 25%.

    Bank of the West, along with other PPP lenders, is awaiting further guidance from the SBA and the U.S. Department of the Treasury on the manner in which these changes will be implemented. In order to take full advantage of these new provisions, we suggest you wait to submit requests for forgiveness until the SBA provides more guidance, while continuing to gather documentation in support of any forgiveness request.