Last night, Wednesday June 10, 2020, the SBA issued revisions regarding the Payroll Protection Program (PPP) Loans, including the following:
- Maturity date
- For loans made before June 5, 2020, the maturity is two years; however, borrowers and lenders may mutually agree to extend the maturity to five years
- For loans made on or after June 5, 2020, the maturity is five years
- Deferral period
- If a borrower submits to its lender a loan forgiveness application within 10 months after the end of the “loan forgiveness covered period”, no payments of principal or interest on the loan will be required before the date on which the SBA remits the loan forgiveness amount to the lender (or notifies the lender that no loan forgiveness is allowed)
- The loan forgiveness covered period is the 24-week period beginning with the date the PPP loan is disbursed; however if the loan was made before June 5, 2020, the borrower may elect to have the loan forgiveness covered period be the eight-week period beginning on the date the loan was disbursed
- Loan forgiveness period of any borrower ends no later than December 31, 2020
- Interest continues to accrue during the deferment period
- Forgiveness calculations pertaining to payroll cost percentage
- In order to obtain full loan forgiveness, at least 60% of the loan proceeds must be used for payroll costs
- The 60% requirement is a proportional limit on forgiveness, rather than a threshold for receiving any loan forgiveness
- As an example, if a borrower receives a $100,000 PPP loan and spends $54,000 on payroll costs, the maximum loan forgiveness will be $90,000 [($54,000/$60,000) x $100,000]. In other words, $54,000 of payroll costs and up to $36,000 of nonpayroll costs may be forgiven
- EIDL loans
- If an EIDL loan was received from January 31, 2020, through April 3, 2020, application may also be made for a PPP loan.
- If the EIDL loan was not used for payroll costs, it does not affect eligibility for a PPP loan
- If the EIDL loan was used for payroll costs, the PPP loan must be used to refinance the EIDL loan
- Proceeds from any advance up to $10,000 on the EIDL loan will be deducted from the loan forgiveness amount on the PPP loan
- For purposes of calculating the 60% requirement, the amount of any EIDL loan refinanced will be included in payroll costs
As additional information and clarifications become available, we will keep you posted. Should you have questions regarding this recent development, or if we may assist you in any way, please do not hesitate to contact us.
We wish you continued health and safety.
The Partners of
Russell Thompson Butler & Houston, LLP