Paycheck Protection Program borrowers get more flexibility

Sunday, 17 May, 2020

Under the CARES Act, the PPP facilitates bank loans to small businesses guaranteed by the Small Business Administration to help cover payroll and other expenses during the COVID-19 pandemic. The first round of funding provided $350 billion in loans; Round Two provided an additional $300 billion. In its latest guidance, the SBA resolved the question by providing a "safe harbor" for any borrower that received a loan of less than $2 million. The Justice Department last week brought the first criminal case related to the program when it charged two New England businessmen with fraud and alleged that their applications falsely claimed employees they don't have.

"I want to be very clear-it's the borrowers who have criminal liability if they made this certification and it's not true", he said, according to CBS. New Orleans-area lenders say applications have slowed considerably over the past week.

The so-called safe harbor period, which ends Thursday, was meant to allow businesses that received money to ensure they meet the qualifications.

"While we would never tell a pastor what he must do, [this] guidance is welcomed in light of the need for clarity around the Paycheck Protection Program and its intended purposes", Harold R. Loftin Jr., chief legal officer at GuideStone, said in written remarks. FAQ 46 states that, during the review, if the SBA determines that the borrower lacked an adequate basis for making the certification in good faith, then the SBA will seek repayment of the outstanding PPP loan balance and the borrower will not be eligible for PPP loan forgiveness.

It's meant to end up as a grant if used under certain circumstances, but not everyone is clear on what those are.

"It's important to understand from the time the loan is funded there's an eight week clock that's going to run and your payroll is forgivable".

Dean Phillips, will eliminate provisions in the loans that mandate 75 percent of funds to go to payroll without repealing conditions that require employers to retain staff throughout the crisis. The terms appeared to ease a requirement that businesses rehire a certain percentage of their employees in order to obtain forgiveness.

"While the program has provided a critical financial lifeline to those of our member companies who have successfully been able to apply since its launch on April 3, shortcomings associated with the initial rollout suggest the need for improvements", Eben Peck, ASTA's EVP, advocacy, said in the letter.

The loan amount is also based on prior staffing levels - before many small businesses laid people off or reduced salaries.