June 23, 2020
In a survey of 685 businesses from the National Federation of Independent Business, 80% of owners applied for a SBA Paycheck Protection Program (PPP) loan and 90% of those who applied received one. A good majority of our portfolio companies did the same. But the path towards forgiveness of those loans – a key hallmark of the PPP – can be difficult. Earlier this month, the SBA published a revised, borrower-friendly PPP loan application, as well as a new EZ version for eligible borrowers, which requires fewer calculations and less documentation. The new forgiveness applications follow passage of the Paycheck Protection Program Flexibility Act of 2020 to extend the time frame to apply.
Still, while some are in the process of applying for forgiveness, there is more than $130 billion in funds left over from phase two of the program. Some businesses remain hesitant due to the uncertainty surrounding forgiveness of the loans; however, the flexibility act makes the following key changes to help businesses in need receive loans and achieve forgiveness:
1. Less money needs to go to payroll: Previously 75% of the loan had to go to payroll for the loan to be forgiven. That number has been reduced to 60%
2. More time to spend: The new legislation extends the time business owners have to spend the funding from 8 to 24 weeks
3. More time to bring back workers: Employers now have until December 31 to bring back laid off workers
4. More time to repay: Borrowers who applied before June 5 can now extend repayment from two to five years
5. Payroll tax payment can be delayed: Prohibited under the original CARES Act, the new legislation allows businesses that took a PPP loan to delay payroll tax payment
The changes the SBA has implemented will likely make it easier for businesses to realize full forgiveness of their PPP loan. But as businesses continue to seek out financial relief to work through this difficult time, there still remains an elephant in the room: What comes next? Check back in the coming weeks as we discuss and analyze recovery solutions for small business.
The investments, portfolio companies and recommendations listed on this website represent only a sample of companies that have received investment capital from Advantage Capital-related entities. It should not be assumed that recommendations made in the future will be profitable or will equal the performance of the securities highlighted herein or contained in any other information provided by Advantage Capital. Past performance is no guarantee of future results. For a full list of companies, please click here.
