The federal government’s PPP loan was designed to allow contractors, self-employed individuals, and small businesses under 501 employees to get emergency funding to keep people on payroll. If they spend the loan on qualified expenses it can be forgiven. You can still apply for a PPP loan through Kabbage here until 6/30.
President Trump signed the PPP Flexibility Act into law today.
It will:
- Reduce the amount of the loan needed to be used on payroll from 75% to 60%. This addresses a complaint from businesses that they needed to be able to pay for rent, utilities, and mortgage payments in addition to paying salaries.
- Increase the time frame to use the funds from 8 weeks to 24 weeks, but the period won’t extend past 12/31/20.
- Extend the time frame to rehire employees from June 30 to December 31 to pre-pandemic levels and still qualify for loan forgiveness. This benefits those businesses that are still closed. There are also exceptions added if you are unable to rehire employees or can’t return to previous business levels.
- Extend the repayment period for new borrowers from 2 years to 5 years at 1% interest if your loan isn’t forgiven.
- In the bad news department, it appears that if you don’t use 60% of your loan for payroll, then none of your loan will be forgiven. Previously with the 75% threshold there would have been partial forgiveness.
It’s unclear what exactly the new cap will be for how much of an employee’s or owner’s salary that can be covered, will it be 8/52 or 24/52 out of $100,000?
I’d expect more clarification and FAQ from the SBA in the coming weeks.
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24 Comments On "President Trump Signs New PPP Flexibility Act Into Law!"
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All this applies retroactively to anyone that already received the PPP?
Yes, except for the 5 year repayment period.
Shoot, that’s not good, that means less money that my employer has to use to pay me..
I don’t believe that’s true.
I believe if the lender agrees it can be modified to 5 years.
“It’s unclear what exactly the new cap will be for how much of an employee’s or owner’s salary that can be covered, will it be 8/52 or 24/52 out of $100,000?”
You are unclear if we can get now additional money to cover more weeks of payroll?
You don’t get more money, but the question is how much can be used for payroll to qualify for forgiveness.
If i understood your question correctly, it would have to be 24/52. Otherwise that would make a business turn-over different employees every 8 weeks to be included in the forgiveness rather than keeping the existing employees for the full 24 weeks.
It’s unclear what exactly the new cap will be for how much of an employee’s or owner’s salary that can be covered, will it be 8/52 or 24/52 out of $100,000
This is very important, if its 24/52, that means that any self employed will automatically be forgiving the entire loan.
When applying for the PPP loan/grant, how is it determined how much money each applicant/business gets?
1 man company here doing myself payroll… I personally stayed on unemployment instead of signing the PPP loan paperwork even though i was approved few weeks back. I didn’t wanna double dip and unemployment seemed more beneficial. Businesses still closed. What if i sign the loan paperwork now? Should i get off unemployment right away even though my business is closed?
i would wait till i get the ppp loan
You don’t want to collect unemployment and take PPP for self employment covering the same period. On one or both forms, you’ll be lying under oath.
You’re business can hire someone else who is not collecting unemployment and collect the PPP benefit.
I have no intention on playing games with the government, and in general I’m not a lying man.
What confuses me now is, since the is 24 weeks to use those funds toward payroll…hypothetically, do i have to start paying myself from the ppp loan fund once they land my account?
no. You can pay yourself when your company starts “working again”
that’s why I wrote that after getting the ppp I would suspend the unemployment, but till then he can get unemployment.
don’t use the ppp yet – don’t open your business yet – stay on unemployment -open your business in October and use the ppp money then. it seems that this would be legal and to your best advantage
Just more time to spend it
How about a landlord with an LLC And rent is not coming in?? Anything I can get? No employees and I have not filed a schedule C
You should be filing a schedule E not C
Anyone know if i will be able to apply for EIDL. for a regular business?
Is this separate from the previous loan given? I haven’t signed up for any of them, but I’m interested in doing so. I’m self-employed / contractor. Am I able to sign up? If so, which loan should I sign up for? Both? Can I do both? TIA for your help 🙂
Dan,
The CARES ACT provided that any forgiven PPP loans would be excluded from gross income and not taxable. This is the basis on which all borrowers took these loans-that they can spend it all on their business without having to reserve a significant portion for taxes. On April 30th the IRS came through the back door and issued notice 2020-32 that essentially said OK if the CARES act does not allow us to tax the Income than we will disallow the expense deduction for all expenses paid with PPP funds-this essentially makes PPP fully taxable. Businesses do not have a huge cash reserve to pay taxes on funds they thought were tax free. Immediately after the issuance of the IRS notice bipartisan leadership cake out and said the IRS was going against congressional intent that PPP should be tax free and they inputted language into the Heroes ACT to reverse this IRS notice and allow the expense deduction for PPP funds. Realizing the Heroes act may be stalled they (led by Chuck Grassley,John Cornyn,Ron Wyden,Marco Rubio,Tom Carper and supported by many more on both sides of aisle)drafted S-3612 Business Expense Protection Act but that has faced some resistance and has not been able to come up for a Vote yet in the Senate. They tried to get it included in the PPP flexibility act but that would’ve stalled that legislation as there are some senators and Primarily Treasury Secreatary Steve Mnuchin that believes that allowing expense deduction would be double dipping. Congressional leader on both sides have countered it is not double dipping as congress clearly intended for PPP funds to be non-taxable and the IRS notices effectively makes it taxable and against congressional intent. We need to do all we can to make sure S-3612 business protection act is pushed through the Senate and House and the President signs it into law above objections from holdout senators and Mnuchin, other wise business owners who were operating under the belief that these funds are excluded from Gross income (as the CARES act clearly states) can be in for a large nasty surprise tax bill (because of disallowed expenses in an amount equal to forgiven funds) which they may not have the reserves to cover.
Dan or anyone that knows,
How can I apply for a self employed business that I opened in 2020. I’ve read that the SBA approved it but don’t know how or where to go about it.
I tried through Kabbage bank but they say “we don’t have enough info available from the SBA to continue the application”.
Any leads would be greatly appreciated.