In 72 hours, the first round of the Paycheck Protection Program exceeded the $350B capacity. In contrast, $120 Billion in loan capacity is still available after a month into Round 2. Congress interpreted this to mean that the loan forgiveness terms were too strict and passed legislation last night to add flexibility.

Here we relay important changes in loan terms, tips on navigating forgiveness, and what to do if you still want to apply.

How PPP Loan Terms Have Changed Since our Last Update:

• More Flexible Uses: The percent of mandated PPP funds used towards payroll has decreased from 75% to 60%, leaving 40% for mortgage payments, utilities, and other approved expenses
• All or Nothing Forgiveness: Unfortunately, if you only use 59% of the proceeds for payroll –instead of 60% — none of the loan is forgiven compared to the previous partial forgiveness structure. This is an attempt to ensure more of PPP funds go to payroll, even with the lower requirement
• A Longer Window to Spend: The funds now may be used for 24 weeks, instead of 8 weeks. Companies were running into the 8-week limit while still facing COVID-19 closures

• Extended Maturity: If the loan is not forgiven, the repayment term is now 5 years instead of 2 years. This will ease the debt burden of companies that do not qualify for forgiveness

Tips on Navigating Forgiveness

• Follow the Form: Notwithstanding a brief 3-page loan application, the PPP loan forgiveness application is 11 pages. Doing your homework in advance will make the longer application much easier to complete after spending the funds 

• Tap Public Resources: Guides like co’s step by step checklist and Mark Cuban’s forgiveness application creator makes the processes much less intimidating if you plan to go it alone 

• Ask for Help: A payroll service and/or CPA will make the loan application, tracking use of funds, and forgiveness much more manageable, which frees up your time to navigate this new environment

Is Too Late to Apply?

• Funds Are Still Available: Many businesses have told us they thought it was too late to apply … or PPP took a back burner to other priorities. There is still time. With the newly legislated flexibility, however, it may go quickly, so act fast.

• Where you Apply Matters: Our advice to utilize community banks, credit unions, and CDFIs has paid off for PPP applicants. These lenders have the capacity to take on new relationships. Typically, they offer face-to-face support with the application and forgiveness process – as opposed to their larger counterparts. 

Carofin is here to be a resource, find answers, and create solutions, so feel free to reach out to us with questions. Carofin and its affiliates have supported small businesses for 25 years.  They are the lifeblood of our economy, and we are available to support employers’ financing needs through this difficult period.