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PPP Forgiveness Rule Change with PPPFA

Dear Clients of SKJ & Company, P.S.

Paycheck Protection Program Flexibility Act (PPPFA) came into effect on June 7, 2020 relaxing the existing PPP forgiveness rules. We hope our clients find the following information useful planning the use of their PPP funds.

Key highlights of PPP forgiveness rule change:

  • The portion of loan to be used on payroll is reduced from 75% to 60%.

    • Accordingly, 40% can be used on rent, payroll and other qualifying expenses.

  • The Covered Period is extended from 8 weeks to 24 weeks.

    • However, the ending date for the covered period cannot be after 12/31/2020.

    • Borrowers may choose to keep their 8-week Covered Period.

  • Deadline to re-hire employees is extended from 6/30/2020 to 12/31/2020.

    • For full PPP forgiveness, full-time equivalent (FTE) and wage level must be maintained comparing to 2/15/2020.

    • If the FTE and the wage level is restored by 12/31/2020 (used to be 6/30), FTE/wage level rules do not apply.

    • Still, Borrowers must spend at least 60% on payroll and 40% on other qualifying expenses.

  • Any unforgiven loan balance is now subject to the following rules:

    • Loan period is extended from 2 years to 5 years.

    • Repayment is deferred for 6 months from the date the PPP forgiveness application is submitted to the lender.

      • This used to be 6 months from the date of loan disbursement.

  • The application for loan forgiveness must be submitted to lender within 10 months after the Covered Period.

We understand the PPP related rules are complex and changing, making borrowers difficult to plan for use of the fund. Accordingly, we are providing some guides below that may be useful for our clients.

  • Log the dates of government orders on business closure and reopen along with the actions your business has taken.

  • For rehiring employee hours, maintain as many headcounts as possible. Avoid overtime hours.

  • Re-hiring standby employees, notify the employee in writing. The employee’s response should also be in writing if he/she chooses not to return.

  • Keep all records of PPP expenses. Avoid use of cash.

Thank you,

SKJ & Company, P.S.