SBA Plan Offers Great Opportunities; Changes Occur on Hourly Basis
~ by Trevor Phipps ~
As soon as the coronavirus pandemic struck the nation in March, U.S. lawmakers approved the Paycheck Protection Program (PPP) to help businesses deal with closures and loss of revenue during the crisis.
Under PPP, the Small Business Administration (SBA) provides forgivable loans to businesses so they can keep their payroll going and their rent and utilities paid during losses due to the pandemic.
Last week, the Greater Woodland Park Chamber of Commerce held a meeting online to further educate business owners about the “Ins and Outs” of the PPP loan program. The meeting had to be rescheduled and postponed for a week due to Congress recently passing the PPP Flexibility Act, causing the specifics of the loan to change once again.
The PPP loan is structured in a way that businesses seeking financial help must apply for the loan through a bank, and then the SBA forgives the loan and pays the bank back if the requirements are met.
Officials attending the meeting included two local PPP experts, Vectra Bank Woodland Park’s Market President Shannon Andersen and Park State Bank and Trust’s PPP Project Manager Kathryn Perry.
During the meeting both of the local experts agreed that the process has been confusing because details surrounding the PPP loan have been changing constantly. “As you all were aware for the application process things changed quite frequently, if it wasn’t daily it was hourly,” Andersen said. “So, this is the information that we have now and it could change in five minutes, it could change next week, we just don’t know.”
During the meeting, Andersen and Perry started by talking about the changes that have recently been made to the PPP through the recently passed Flexibility Act. They then explained the entire process from application procedures to the forgiveness step. At the end of the online seminar, the two bank representatives took questions from local business owners.
In order to be granted the PPP forgivable loan, businesses must go through a lengthy application process that can take several months to get approved and then they can receive a certain amount based on their revenue and expenses. To get the loan forgiven or paid back by the SBA, the business must use the money for specific expenses such as payroll for their employees, rent, utilities or leases on commercial or private property that is used for business purposes like a vehicle.
Under the Paycheck Protection Flexibility Act that was just signed, the minimum amount businesses must use the loan monies on decreased from 75 percent to 60 percent. Now businesses must use 60 percent of the loan on their employees’ payroll and they can use the other 40 percent on other approved expenses such as rent and utilities.
Previously the covered period under the PPP loan was only eight weeks. Now with the signing of the Flexibility Act, businesses have the option of being covered up to a 24-week period. The new loans now have a minimum maturity of five years and old loans can be adjusted by a mutual agreement between the buyer and lender.
Under the first PPP Act passed, employers had until June 30 to rehire their employees and have their loans be forgiven. Now under the new changes, companies have until December 31, 2020.
After the application process, if approved, business owners can get an amount of money based on their specific expenses. If the business chooses to use the monies provided in the loan on payroll, rent and utilities as outlined, then they can apply for forgiveness and the SBA will pay the bank the loan back. The business owners must present proof that they spent the money on allowable expenses in order to get the money reimbursed.
If the business chooses to use the loan money or a section of it on other things that aren’t covered under the allowable expenses, then they must pay the bank back for that portion of the loan. However, the two local experts present at the local Chamber of Commerce Lunch and Learn last week both agreed that it would be a good time to invest into a business or expand it using the PPP monies.