FACEBOOK LIVE EVENT THIS WEEK
Please join me for my Facebook Live event:
Tuesday June 9, 1pm EDT/10am PDT
Update on the new rules on PPP forgiveness and strategies to help your business survive. Go here to join or to watch later.
And if someone forwarded you this newsletter, you should sign up here.
NEW DATE! Tuesday, July 21! 2pm EDT/11am PDT
I will be the guest speaker (and take questions!) as part of the Verizon Small Business Webinar Series on the topic of Smart Ways Small Business Can Manage and Spend Money. Go here to register.
Welcome to this week’s small business update.
PPP Forgiveness Changes—IMPORTANT!
As of Friday, legislation was passed making important changes to the forgiveness provisions of the PPP loan program. Most importantly, you’ll have more time to meet the forgiveness provisions and you can use more of the funds on non-payroll expenses.
Please note: There is still money in the PPP program, so if you did not apply because you did not feel you could meet the forgiveness requirements, these new rules might make it possible for you. Best bet: check with your local community bank or credit union, and PayPal and PsPrint appear to still have funds available, working with Fundbox. Go here for more information from Fundbox.
THE NEW RULES
Following is a summary of the legislation’s main points compiled by the organization of accountants, the AICPA:
- Current PPP borrowers can choose to extend the eight-week period to 24 weeks, or they can keep the original eight-week period.
- New PPP borrowers will have a 24-week covered period, but the covered period can’t extend beyond Dec. 31, 2020.
- Borrowers can use the 24-week period to restore their workforce levels and wages to the pre-pandemic levels required for full forgiveness. This must be done by Dec. 31, a change from the previous deadline of June 30.
- Payroll expenditure requirement drops to 60% from 75% but is now a cliff—rather than a sliding scale—meaning that borrowers must spend at least 60% on payroll or none of the loan will be forgiven. Currently, a borrower is required to reduce the amount eligible for forgiveness if less than 75% of eligible funds are used for payroll costs, but you can still get partial forgiveness (on a sliding scale) if the 75% threshold isn’t met. (Congresspeople and Senators have said the intention was to continue a sliding scale. If Treasury Secretary Mnuchin doesn’t allow the sliding scale, there may be legislation to force that provision.)
- New borrowers now have five years to repay the loan instead of two. Existing PPP loans can be extended up to five years if the lender and borrower agree. The interest rate remains at 1%.
- The legislation includes two new exceptions allowing borrowers to achieve full PPP loan forgiveness even if they don’t fully restore their workforce. Previous guidance already allowed borrowers to exclude from those calculations employees who turned down good faith offers to be rehired at the same hours and wages as before the pandemic. The new bill allows borrowers to adjust because they could not find qualified employees or were unable to restore business operations to Feb. 15, 2020 levels due to COVID-19 related operating restrictions.
- The bill allows businesses that took a PPP loan to also delay payment of their payroll taxes, which was prohibited under the CARES Act.
TWO LEADING BANKING GROUPS CALL FOR AUTOMATIC LOAN FORGIVENESS
Two leading banking associations have said businesses could save $7 billion if the Treasury Department made the forgiveness process automatic—and simpler—for the smallest PPP loans, those under $150,000. Borrowers would still have to verify that they used the funds in the way Congress mandated, but the forms would be much simpler than the ones the SBA and Treasury are now requiring. Banks want to cut the red tape both they and their borrowers have to deal with.
This is common sense! CONTACT YOUR SENATORS AND CONGRESSPEOPLE (including through their social media channels) and urge them to tell the SBA and Treasury to support this sensible proposal. Treasury Secretary Mnuchin has it in his power to make this sensible change.
WHAT YOU AS A SMALL BUSINESS OWNER CAN DO
Right now, you’re probably just trying to ensure that your small business survives the impact of COVID-19. But America is at a turning point when it comes to matters of police violence and racism. Your voice matters as small business owners are some of the most respected members of their communities. In my USA Today column last week, I laid out some specific steps you can take now to have an impact. You can read that here.
PLEASE SHARE WITH ME YOUR FAVORITE BLACK-OWNED SMALL BUSINESS
To shine a light on black entrepreneurs at this time, please share with me your favorite black-owned small businesses (you can be the owner!). I’ll give them/you a shout-out on Instagram and Twitter and hopefully spread some light during this time of unrest. Send your favorites here!
I will discuss all of this further during my Facebook Live session this week—June 9 at 1pm EDT/10am PDT. Go here to join or to watch later. Learn more in future newsletter updates as well. Sign up here if you are not already on my mailing list.
Stay well, stay in business.
Copyright Rhonda Abrams, 2020