Central Mass. businesses encouraged to take advantage of PPP flexibility
Photo | WBJ
An N95 surgical mask
With the federal government now adopting the Paycheck Protection Program Flexibility Act of 2020 into law, Central Massachusetts businesses are being encouraged to take full advantage of the longer timelines and forgiveness in the program designed to help small businesses financially during the coronavirus crisis.
Major changes the act provides are increasing the covered loan period from eight weeks to 24 and lowering the requirement from 75% to 60% of the PPP loan being spent on payroll in order to qualify for full forgiveness.
This means businesses have 24 weeks to spend the loan money for the purposes that CARES Act allows: payroll, rent/mortgage, and utilities.
Though the period has been extended to 24 weeks, businesses given loans before June 5 can elect to stay within the eight-week period.
Rory Fazendeiro, partner at Worcester law firm Bowditch & Dewey,, however, advised unless a business is absolutely certain it can use the funds and can get full forgiveness, there is no reason to turn in its forgiveness application within the 8 week period.
Fazendeiro made his recommendation during Worcester Business Journal’s webinar on the PPP loan forgiveness program, which is part of
WBJ hosted a webinar featuring panelists Rory Fazendeiro, Alan Osmolowski, and John Mannila on Tuesday June 9th regarding the federal government’s changes to guidelines for PPP loan forgiveness, part of WBJ’s ‘Business Strategies: Coping with COVID-19’ webseries.
The Flexibility Act also expanded safe harbors from reductions in forgiveness based on reduction in FTEEs. If a business has had to reduce its workforce or is unable to hire or rehire a worker because of COVID-19 regulations, this will not work against them getting their loan forgiven.
One element that this act did not change is that the deadline for applying for a loan is still June 30.
Alan Osmolowski, industry partner leader at accounting firm BlumShapiro, which has an office in Worcester,, then discussed the favorable changes to loan terms with the Flexibility Act.
The loan repayment period for businesses that must payback parts of their PPP loan has been extended from two years to five years. Moreover, the date of when the repayment period begins has been pushed out to beginning when the business receives the number of unforgiven money from the SBA.
If a business chooses not to apply for forgiveness, it has 10 months after the last day of the loan period to start repayment.
There is also a new delay in payment of employer payroll taxes which helps businesses from a cash flow perspective. Even if a business only has a portion of their PPP loan forgiven, it is still able to defer payroll taxes.
Osmolowski then touched on how this bill did not address parts of the tax code that came into play for businesses. If businesses have an expense that is reimbursed, it is not currently tax deductible.
As the bill stands now, businesses would have to add even a fully forgiven PPP loan spent on something like income back into their tax return as taxable income. The federal government has said that this is not what they intended and Osmolowski said to stay tuned for their fix to this problem.
John Mannila, vice president at Webster Five bank, then outlined the general process for PPP loan forgiveness.
The first step is for the borrower to complete the application and submit all required supplemental documents to their lender. The platform in which borrowers must do this is still being determined and will probably vary depending on the lender’s preference.
Once receiving these documents from the borrower, the lender has 60 days to issue a decision on forgiveness to the SBA.
During this time, lenders will go through all submitted documents to make sure that the loan money was used correctly without fraud and that the business meets the requirements for forgiveness.
The SBA then has 90 days to remit the amount to the lender.
Mannila’s recommendation for documents to include in a loan forgiveness application include bank account statements or third-party payroll service provider reports, tax forms, payment receipts, canceled checks, mortgage interest payments, rent or lease payments, and utilities statements.
He finished with a reminder the U.S. Small Business Administration can review the loan forgiveness documents and audit a business within a six-year time frame after PPP loan forgiveness. This is a long window and Mannila suggested businesses set up a separate file with their information as a backup in the event that the government does decide to do an audit on their business.
After each panelist finished, the webinar then opened up for a Q&A session.
The most popular question received was whether or not businesses must either choose to commit to the eight-week period or the 24-week period. All of the panelists agreed unless a business is 100% sure that they will receive 100% loan forgiveness, there is no use in applying earlier.
However, there has not been any specific information and they believe additional guidelines about timeframes will be coming out soon.
Other questions regarded the payroll thresholds and caps.
The 60% payroll threshold is a minimum which means that going over that minimum percentage is fine. You are still eligible for some loan forgiveness if you spend less than that 60% on payroll as well.
Additionally, the rate of annualized payroll still applies and the $100,000 payroll cap does carry over despite the widened time period.
The panelists stressed more information and detailed guidelines continue to come out and there is still a lot of gray area Congress is working to clarify. Because of this, it is important to be checking often for new information to help businesses in the loan forgiveness process.
WBJ Web Partners
Most Recent
Most Recent
0 Comments