Published in Small Business
PPP changes would extend timeline, increase flexibility for loan recipients COURTESY PHOTO: United States Senate

PPP changes would extend timeline, increase flexibility for loan recipients

BY Friday, June 05, 2020 05:55am

Changes approved by Congress to the federal Paycheck Protection Program would give millions of small businesses more time to use the money and adjust how much of the loan needs to go to payroll expenses to earn forgiveness.

Those were two key areas that business groups say needed altering from the PPP program created under the CARES Act.

Legislation approved this week by the U.S. Senate tripled from eight weeks to 24 weeks the amount of time small businesses have to use the money. That gives greater flexibility and more time for small businesses that have been completely down for weeks because of stay-at-home orders to reopen and bring back workers.

“You have a longer period of time to get up to full staff that you didn’t have before,” Small Business Association of Michigan President Brian Calley said Thursday during a daily briefing on the pandemic.

The bill — approved last week by the U.S. House on a nearly unanimous vote and now awaiting President Trump’s signature — also reduced to 60 percent from 75 percent how much of the proceeds must go to payroll expenses, providing flexibility as well in how PPP loan recipients can use the funds to cover operating expenses such as rent and utilities.

“This will really help as some businesses in Michigan are just now bringing employees back to work now that the stay at home order has been modified and it helps the seasonal businesses which are a big part of the Michigan economy,” Mike Tierney CEO of the Community Bankers for Michigan, wrote in an email to MiBiz.

Congress did not address what Tierney described as “the excessive paperwork required for loan forgiveness for small loans — and the various industry lobbying groups including CBM will now direct our efforts to the Treasury/SBA to make a few needs (sic) changes to reduce paperwork,” Tierney said. “The Treasury Department has the authority to do this and all industry groups, even labor unions, will support the reduced paperwork changes.

“We want the equivalent of a Form 1040EZ for loan forgiveness for loans under $350,000. Even if they set the level at $150,000 it would save business owners, CPAs and bankers a mountain of work at a time when people need to be focused on getting the economy and their businesses up and running again.”

Tierney also pointed to another “technical problem” with the legislation. Under the PPP changes, if a small business does not meet the new 60 percent target, then none of the loan is forgiven, he said.

“This is a real danger for business owners and they need to be aware of it,” Tierney said.

Since launching the PPP on April 3, the U.S. Small Business Administration has approved more than 4.4 million loans nationwide through the end of May, totaling $510.2 billion. In Michigan, 133,487 small businesses received PPP loans for nearly $15.7 billion through May 30.

The SBA still has about $130 billion in PPP funding left to lend. The application deadline is June 30.

Other changes the legislation would make to the PPP are an extension from two to five years to repay loans at an annual interest rate of 1 percent. PPP borrowers also now have until Dec. 31 to use the loans funds.

In survey results released this week, the National Federation of Independent Businesses said that nearly one-quarter of PPP loan recipients have already used at least 75 percent of the money they received, and that just 4 percent has used all of it. One-quarter of small businesses that got a PPP loan and answered the NFIB survey said they had used 25 percent to 49 percent of proceeds, and nearly one-quarter has used at least 75 percent.

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