President Trump Signs into Law June 5th
Back in April, when the Small Business Administration was approving about $25 billion in coronavirus loans a day, lawmakers and companies were concerned that $669 billion in relief would run dry, leaving countless mom-and-pop businesses hanging.
Yet the Paycheck Protection Program had more than $100 billion in funding left as of last Saturday, with only days remaining until the SBA stops taking new applications on June 30.
The PPP loans were a lifeline for the more than 4.7 million companies that got assistance — with an unprecedented $516.5 billion approved over two rounds in less than three months. Still, demand waned after an initial barrage. Millions of the smallest and most vulnerable businesses didn’t know they were eligible or didn’t apply because the complicated program didn’t meet their needs.
The TQA addresses accounting for nongovernmental entities only (which include business entities and not-for-profit entities (NFPs)). The TQA explains that an entity accounting for the PPP loan under Topic 470:
The TQA also states that in situations in which the PPP’s eligibility and loan forgiveness criteria are expected to be met:
The Payroll Protection Program (PPP) continues to evolve. The Paycheck Protection Program Flexibility Act (PPPFA) was passed nearly unanimously by both houses of Congress and signed into law on Friday, June 5. On Wednesday June 10, the Department of Treasury released Paycheck Protection Program – Revisions to First Interim Final Rule, a statement on how the Treasury Department is interpreting the new law.
This new legislation and statement support entrepreneurs by reducing restrictions on how PPP money can be spent and increasing the timeframe to spend the loan.
Historically, the 75/25 Rule required entrepreneurs to spend at least 75% of the PPP loan on payroll costs in order to receive loan forgiveness. The PPPFA also makes it easier for entrepreneurs to qualify for loan forgiveness by reducing the percentage of the PPP loan proceeds that must be spent on payroll costs from 75% to 60%.
The Paycheck Protection Program, a centerpiece of the $2.2 trillion CARES Act, provided forgivable loans of up to $10 million to businesses with fewer than 500 workers.
President Trump on Friday signed into law bipartisan legislation giving small business owners who tapped a federal aid program more flexibility in how they spend the loans, the latest effort by the federal government to blunt the economic pain of the coronavirus pandemic.
But the new law – the Paycheck Protection Program Flexibility Act – eases the restrictions on how the money must be spent in order to be forgiven. Loan recipients now only have to spend 60 percent of the aid on maintaining payroll — including salary, health insurance, leave and severance pay — rather than the previous 75 percent rule. The remaining 40 percent can go toward operating costs like rent and utilities.
The second round of PPP funding began April 27 after the initial tranche of $349 billion evaporated in just 13 days. As of Saturday, more than 4.42 million loans worth close to $511 billion had been distributed through the program. Congress allocated about $610 billion to the PPP, leaving roughly $100 billion left over in the fund.
The legislation attempts to address the growing concern among small business owners that the PPP loans simply do not meet their needs. In some cases, the extra $600-per-week in unemployment benefits established by the CARES Act has snarled efforts by businesses to bring workers back, with employees reluctant to forfeit a bigger paycheck and return to their job when the risk of contracting the virus remains high.
Businesses now have 24 weeks to spend the money instead of two months. The bill also lets small businesses that accessed the fund defer payroll taxes.
Roughly two-thirds of workers on unemployment are earning more from the government aid than they did at their old job, according to a paper written by economists at the University of Chicago’s Becker Friedman Institute.
Small business owners have also cited confusion and uncertainty around the forgiveness process and are worried about potentially being on the hook for the money.
Whether you’re a small business owner with employees, a sole proprietor, self-employed, or
an independent contractor, if your business has been affected by COVID-19 you can get a low-interest federal loan that may be 100% forgiven.