Congress Acts to Ease Requirements on Small Business Loans

The Paycheck Protection Program (PPP) has been a much-needed lifeline for small businesses struggling to stay afloat during the coronavirus pandemic.  However, Congress has been hearing a chorus of complaints from business owners that the rules around loan forgiveness are too rigid, and that these rules have hampered their efforts to keep their doors open and retain employees.

Congress responded last week by passing the Paycheck Protection Program Flexibility Act of 2020.  This bill, which has now been signed into law, gives small business owners more flexibility on how and when to spend their loan proceeds without jeopardizing forgiveness of the loan (or a substantial portion of it).

What does this mean for you?  If you looked at the PPP a couple of months ago, and decided not to apply for a loan, you may want to take a look at the new rules and reconsider.  The Small Business Administration still has substantial funding available for loans.  The deadline for  applications is June 30, 2020, but the changes now allow loan proceeds to be used until Dec. 31, 2020.  

If you already have a PPP loan, you should re-think your spending plan based on the new rules.  You probably have significantly more flexibility now than you did under the old rules. The SBA will release more guidance on the changes soon.

Here are the provisions of the Paycheck Protection Program Flexibility Act that are likely to impact you the most:

• More Time: You now have 24 weeks to spend loan funds on allowable expenditures and still have your loan forgiven.  Under the previous rules, loan funds had to be spent in eight weeks to be forgiven.
• More Time: You now will have at least five years to repay any unforgiven loan amounts.  Under the old rules, unforgiven loans had to be repaid in two years.
• More Flexibility: You now can spend up to 40% of your loan funds on non-payroll costs (rent, mortgage, utilities) and still have your loan forgiven.  Under the old rules, non-payroll costs were limited to 25%.
• More Flexibility: Employers now have until December 31, 2020 to rehire employees without losing loan forgiveness, if the employer certifies that COVID-19 restrictions have continued to harm business operations.
• More Tax Relief: PPP loan recipients are now eligible to take advantage of the deferral of 2020 payroll taxes until 2021 and 2022, just like all other businesses.

If you have not applied for a Paycheck Protection Program loan, and these changes would help your business, you should talk to your bank today.  The deadline for new applications is June 30, 2020.  If you do not have a relationship with an SBA-qualified lender, we can help.   Click here to get more details:  https://www.ncr.com/coronavirus/nymbus-smb-relief.

If your business has more than 500 employees and you are not eligible for a Paycheck Protection Program loan through the Small Business Administration, help may soon be on the way through the “Main Street Lending Program.”  The Federal Reserve is expected to initiate lending through this program soon to businesses with no more than 15,000 employees and $5 billion in annual revenues.  The minimum loan size will be $250,000, and the maximum loan term will be five years.  It is important to note that these will not be forgivable loans.  However, for medium-sized businesses that have struggled to find affordable credit in the financial markets, the Main Street Lending Program may be a valuable option.  Check the Federal Reserve’s website for updates on the upcoming launch of this program: 

https://www.federalreserve.gov/monetarypolicy/mainstreetlending.htm