As PPP loan maturity nears, CT firms secure $ 6.6 billion in funding
Small businesses in Connecticut now have less than two weeks to apply for a potentially repayable loan under the US Small Business Administration’s Paycheck Protection Program.
The deadline to apply for a loan is June 30.
So far, Congress has allocated $ 660 billion for the program, which was created as part of the federal CAREs stimulus act and is now in its second round of funding,
As of June 12, 57,267 Connecticut companies had received combined PPP funding of $ 6.6 billion, according to SBA data. Nationally, 4.6 million loans were issued worth $ 512.3 billion, according to the data.
The application deadline is looming as the rules small business owners must follow to get their federal loans canceled have recently become more lenient under the Paycheck Protection Flexibility Act.
But they may also have gotten a bit more complicated, at least for small business owners who have already secured a P3 loan under the old rules and want to take advantage of the new ones.
One of the biggest concerns with the program was that it crippled business owners in terms of when and how they could use the money if they wanted their loan to qualify for full forgiveness. Those who got the loans already had to spend the money in the first eight weeks and use at least 75% for salary expenses, even though many businesses weren’t even open during that time or were not operating in. full capacity.
Here are some of the ways the new rules could give business owners more flexibility in using their loans while still getting a discount:
More time to spend the money: Instead of eight weeks, borrowers will now have 24 weeks from the day they get their PPP funds to use them.
Less money needs to be spent on payroll: To receive full forgiveness of their loans, borrowers must now allocate at least 60% of their P3 funds to salary expenses and can use the rest to pay overhead costs such as rent, mortgage interest, and utilities. This change will help small businesses operating in high rent areas. If a business owner spends less than 60% on payroll, they may still qualify for a partial discount. The same principle applied under the old rules, but the threshold percentage was below 75%.
More time to rehire staff: To receive a full discount under the old rules, business owners had to maintain the average number of employees they had on staff as of February 15 and pay them at the same rate. Or they had to at least meet those criteria by June 30. The new rules extend this safe haven date until December 31.
Full forgiveness may also be available when a company cannot hire all of its staff under Covid-related workplace safety requirements requiring them to operate at full capacity.
More time to repay: Under the old rules, any part of the loan that was not canceled had to be repaid within two years. This has been extended to five years for loans made on or after June 5. For homeowners who got their loans before June 5, they can make an agreement with their lender to extend their repayment period, said Veena Murthy, director of the Crowe accounting firm. LLP.
Who does it benefit from? Who doesn’t?
The new rules can certainly benefit small business owners who have yet to take out a P3 loan. The good news is that there is still $ 131 billion in the program, according to the latest Small Business Administration tally. But June 30 remains the last day to approve a PPP loan application. So anyone who hasn’t applied yet should do so soon.
The Treasury and the Small Business Administration said Monday they would issue guidelines on how the changes should be interpreted and administered by lenders – along with amended application forms.
But the new rules are unlikely to benefit small business owners who received their P3 loans earlier, are at or near the end of their eight-week period, and have spent most – if not all – of their time. financing in accordance with the old rules. .
And what about those already in progress? Small business owners who have already secured their P3 loans but have not yet spent most of the money can benefit from it. But a number of technical issues will need to be addressed by the Treasury and the SBA before an informed decision can be made, said David Pommerehn, general counsel for the Consumer Bankers Association.
The best advice for small businesses? “Wait and see what the guidelines and rules are, then consult your accountant,” said Brian Pifer, vice president of entrepreneurship at the Small Business Majority advocacy group. Or any other expert you have consulted so far, such as a lawyer or your lender.
For all of the small business owners with P3 loans, the issue of forgiveness has been the most vexing. Although the new rules will ensure that more people are likely to have their loans canceled, they still have to go through a lengthy application process to show that they have met all the criteria.
The CBA has advocated for the automatic cancellation of all loans under $ 150,000, which is about 85% of loans made so far, but only 26% of funds loaned so far. Such a decision would save more than $ 7 billion and 70 million hours of work, estimates the ABC.