In early August 2020, the U.S. Small Business Administration (SBA) began accepting Paycheck Protection Program (PPP) loan forgiveness applications. In addition, new guidelines were introduced on the loan forgiveness process and a new appeals process. There is continuing confusion regarding the forgiveness process, and many businesses are waiting until everything is straightened out.
What is the PPP Loan Program?
The PPP was designed to offer low-interest forgivable loans to small and medium-sized businesses that continued to maintain their payrolls during the pandemic. The maximum loan amount was $10 million. Businesses that used at least 60% of their loan for payroll and not for other business expenses were supposedly entitled to loan forgiveness. This makes it, in effect, a federal grant.
The program ended on August 8, 2020, leaving $134 billion in loan funds unclaimed. There has been conflicting guidance from Congress and the SBA on how the PPP should work. This has led to a great deal of confusion for small businesses.
The strict rules regarding loan forgiveness were loosened in some changes that were made in June of 2020. The application form was streamlined. The requirement that the business uses the money within the first eight weeks of receiving it was also relaxed. They now have 24 weeks. The change from having to use 75% for payroll to having to use 60% was also implemented. In addition, there was a requirement that businesses had to rehire all of their staff by June 30. That has now been extended to December 31. Businesses also have more time to repay any portion of the loan that is not forgiven.
Businesses were also recently given the right to appeal any decision regarding the forgiveness of their loan. Once the SBA has issued a final decision, either denying a business’s loan application or a borrower’s forgiveness application, the business will have 30 days to request an appeal before an administrative law judge at SBA’s Office of Hearings and Appeals.
Even in the face of these new changes, uncertainty remains. Congress and the SBA may still make further changes regarding the program. There are currently two Senate bills that propose some major changes. It is unlikely that these bills will pass, but it demonstrates how fluid the program has become.
Contact an Experienced Attorney
If you are a small business and have questions about the PPP, you should consult with an experienced attorney. Gregg Goldfarb has years of experience helping small businesses and is available to answer your questions. Contact us online or call us at 305-374-7000 to schedule a free consultation.