The Economic Aid Act that was signed into legislation on made additional business costs eligible. Those four additional categories of eligible non-payroll expenses include:
- Certain operational expenses, such as payments for software, cloud computing services, human resource and accounting needs.
- Property damage costs: defined as costs that are related to property damage and vandalism or looting due to public disturbances that occurred during 2020 and not already covered by insurance or other compensation.
- Supplier costs, i.e., expenditures that a borrower made to a supplier of goods pursuant to a contract, purchase order, or order for goods in effect before the borrower’s applicable PPP loan disbursement that were essential to the borrower’s operations at the time the expenses were incurred.
- Worker protection expenses, such as the costs of personal protective equipment for employees or expenses including capital costs to adapt the business to comply with federal, state, or local requirements or guidance with respect to the COVID-19 pandemic.
Are these truly forgivable loans?
At least 60 percent of the PPP loan proceeds must be used for payroll expenses. If an EIDL is refinanced, that amount will be used in the calculation to determine the percentage used for payroll costs. If 60 percent is not used for payroll, a proportionate amount of payday loans in north yarmouth me the loan can be forgiven.
If PPP funds are used for unauthorized purposes, the borrower will be required to repay the loan. Additional liability may be placed on a borrower who knowingly uses the funds for unauthorized purposes. This additional liability could include charges for fraud.
- The loan is used to cover payroll costs, and mortgage interest, rent, and utility costs over the 24-week period after the loan is made; and
- Employee and compensation levels are maintained. Unless an exemption to maintaining these levels applies to the farm’s or business’s circumstances.
- For a loan to be completely forgiven, no more that 40% of the loan can be used for anything other than payroll. For example, if you use 45% of the loan for mortgage interest, rent and/or utilities, you are required to pay back 5% of the total loan because that is the amount over the 40% you spent on things other than payroll costs.
- Interest at 1%, accrues immediately.
- Payments deferred for six months.
- Loan due in two years if the loan was made before . If the loan was made on or after the loan is due in five years. However, as with any loan, there is always potential for renegotiation. Lenders and borrowers can discuss and if they both agree, the earlier loans could be modified.
Forgiveness process for loans of $150,000 or less
Borrowers that received $150,000 or less can apply for forgiveness using the SBA Forgiveness Application Form 3508S (effective ). These borrowers are not required to submit an application or documentation in addition to the certifications and information required by the Small Business Act. Borrowers must retain records that prove their compliance with the PPP requirements for four years (employment records) and for three years for any other records. Borrowers could be audited or reviewed by SBA.
Can I ask for an increase in my PPP loan that I’ve already received (First Draw Loans)?
Borrowers who have not yet received forgiveness can request an increase in their loan amount if they returned all or part of a PPP loan or didn’t take all of a PPP loan to which they were entitled. A borrower can also be eligible to increase a first loan if the rules changed that allows for an increase. The Center on Agriculture Law and Taxation (CALT) has more information on these circumstances in its blog post: SBA Has Issued Rules for First Draw, Second Draw, and Increased PPP Loans under the section: Increases to First Draw Loans.