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UPDATED PPP FORGIVENESS RULES FROM NEW LEGISLATION
- Extends the covered period (date at which the access to PPP funds will end) to December 31, 2020, from June 30, 2020 (of note, there is approximately $130 billion remaining to be allocated under authorized PPP funds.)
- The 8 week period applicable to forgiveness has been extended to 24 weeks.
- The minimum 75% rule spent towards payroll costs to be eligible for full forgiveness has been decreased to 60%.
- Extends the deferral period (P&I) from 6 months to a date that is the earlier of the date of remittance of forgiveness to the lender or 10 months (in other words, a customized deferral period….could have done without that one.)
From the moment your PPP is funded (deposited into your bank account), your 24 week period to use those funds for the appropriate purposes begins.
The most important attribute of the PPP loan is that part or all of it can be forgiven, if the rules are followed. To refresh you, those rules say that PPP funds should be spent at least 60% on payroll, and 40% on rent and utilities, within 8 weeks.
This is a problem for businesses that have received PPP funds, but legally cannot reopen yet. This puts them in a bad position where they may not be able to get their PPP loans forgiven.
Scenario: Hair Salon received $125,000 in PPP today, but legally they cannot reopen and bring their employees back. That 24 week period clock starts running today. What if they cannot open?
If you are a business owner in this position, be extremely careful about using your PPP funds right now as they may need to be paid back in the future, and may not be forgiven. Hopefully, the government will act to correct this glaring loophole asap.
And remember, An SBA EIDL Grant must be subtracted from the forgivable portion of the PPP.
Questions? Concerns? Call me on (732) 673-0510.
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Chris Whalen, CPA
(732) 673-0510
81 Oak Hill Road
Red Bank, NJ 07701
www.chriswhalencpa.com
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