How Recent PPP Updates Affect Designers

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Received PPP Funds?

For all of our designers that received assistance through the Paycheck Protection Program (PPP), we have the latest information regarding the Paycheck Protection Program Flexibility Act (PPPFA) and what this means for your business. The act passed last week and the main purpose was to provide more flexibility in how businesses can use the funds while allowing greater opportunities to receive forgiveness. Here are the key changes that we believe are most useful to designers, who received assistance. 

We are waiting on clarification and guidance from the SBA along with a modified borrower application form, and a modified loan forgiveness application implementing these legislative amendments to the PPP. We will update you as we hear more information. 

Payroll costs 

Under the PPPFA, the amount of the loan required to be spent on payroll costs is reduced from 75% to 60%, which increases the amount of funds available for certain non-payroll costs from 25% to 40%. The newly passed bill will not change the list of expenses eligible for forgiveness, which still includes rent, mortgage payments, utilities, and interest on loans. During the allocated forgiveness time period, if a borrower is unable to spend at least 60 percent of the loan for payroll cost than partial loan forgiveness will still apply under the PPPFA

Extended time period to use funds 

The time frame to use the loan is now extended to 24 weeks or December 31, 2020, whichever comes earlier. You will still need to use the funds based on payroll and authorized expenses, as mentioned above, however now you have longer to do so. The good news is that the PPPFA also does not require businesses to wait for 24 weeks to apply for forgiveness and can do so after eight weeks if they prefer.

Businesses have longer to hire back their workers

Businesses now have until December 31, 2020, to rehire workers in order for their salaries to count towards forgiveness. 

Rehire requirements are eased

The intent of PPP was to keep the same number of employees on the payroll as was used to calculate the loan, it required a business to rehire the same number of full-time employees or full-time equivalent if applicable. Prior to the PPPFA, the only exception to this rule was if an employer could document in writing an attempt to rehire an employee who rejected this offer. We are waiting for more information and clarification on how the rehire terms are loosen under the PPPFA. 

Repayment terms changed from 2 years to 5

You’ll have longer to repay any loan proceeds that are not forgiven, BUT you will need to work this out with the lender as this may not be automatic.

Under the new law, repayment terms are eased in the event that the loan or portions of the loan are not forgiven. If the loan is required to be paid back, businesses will have 5 years to pay back the loan with a 1% interest rate. To provide additional relief for those who will have to pay back the loan, the SBA will defer your first payment for six months once the decision regarding forgiveness is reached. Based on the current regulations your bank has 60 days to make a forgiveness determination and the SBA an additional 90 days, which means businesses could up until May of 2021 to make their first payment on the loan.

More good news for businesses suffering from this pandemic…

-Businesses that remain partially or fully closed through the end of the year will get new relief. 

-You can now defer certain payroll taxes even if you received a PPP loan.

Please reach out to us for specific questions pertaining to your business. We can be reached at [email protected] 

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