Update on Paycheck Protection Program (PPP) Loans

Updated 7/2/2020 at 9:05am ET

SC&H’s Key Takeaways

  • The PPP loan program is ending on June 30, 2020, and there is still $129 billion available.
  • If you have self-employment income and you were negatively impacted by COVID-19, you qualify and you consider applying before it’s too late.
  • The change in covered period to 24 weeks and a 5-year payback period may entice more business owners to apply.

On June 30, 2020, the Paycheck Protection Program (PPP) is scheduled to end. At that time, banks will stop accepting PPP loan applications. If you have not already received a PPP loan, you have about two weeks left to apply for the program.

After the first round of PPP funds—which consisted of $329 billion—were exhausted in just 14 days, the demand for this second round of PPP funding (there was $310 billion in additional program funding) has dropped off significantly, with more than $129 billion still available to aid struggling businesses. But at the current pace, the program will expire before the funds are exhausted.

So, with millions of businesses still struggling, why is there so much money available and what’s the reason for the significant drop-off in demand? It seems like the answer is focused mostly in two key areas.

  • Loan Qualification/Eligibility
  • Loan Forgiveness

Let’s dive into the details of these two components of the PPP program in case your business is still on the fence, or potentially unaware that you qualify for such a loan.

Who can apply?

As a reminder, businesses qualify for the program if:

  • They have employees to whom they pay wages.
  • They are sole proprietors or independent contractors with positive net self-employment income in 2019.
  • Even if you don’t have a business, per se, but you have a side business or side hustle – you can apply. This includes hobbies that generate self-employment income, and gig workers like Uber and Lyft drivers.

If you have self-employment income and you were negatively impacted by COVID-19, you qualify.

What are the key details on loan forgiveness?

Remember, these loans are forgivable if the loan proceeds are used in the prescribed fashion. Recent changes to the law loosened the forgiveness requirements. Now, you must spend at least 60% of the loan proceeds on “payroll.” You can spend at most 40% on business mortgage interest, rent, and utilities. Also, you now have 24 weeks to spend the money, rather than the 8 weeks outlined in the original law.

We covered many of the more recent clarifications and new guidance in this blog on the PPP Flexibility Act of 2020.

Many businesses that qualify for the program have opted not to take the money, either because they don’t know that they qualify, they don’t know if their loan will be forgiven, or they just don’t want to go into debt.  If you qualify, a PPP loan could essentially replace lost revenue incurred during the current crisis that allows you to keep your business going until the economy opens further.

There are a couple ways to apply:

  • Contact your business banking partner, as long as they’re an SBA-approved lender.
  • Leverage FinTech companies like Kabbage or Womply to streamline the application and submission process for you.

If you aren’t sure whether or not you qualify, please reach out to one of our team members. We will be happy to talk you through the qualification process. If you need help figuring out how to get your loan forgiven, again, please reach out. We can walk you through the forgiveness requirements so you can make an informed decision.

If you have any questions or would like to speak with one of our team members, please don’t hesitate to reach out. SC&H is here to help.