New PPP guidance addresses maturity dates, loan amounts

By Ken Tysiac

Updated Paycheck Protection Program (PPP) guidance issued Thursday and Friday by the Treasury Department and the U.S. Small Business Administration (SBA) addresses PPP loan maturity dates for all borrowers as well as maximum loan amounts for certain self-employed individuals.

All of the updates were designed to reflect the Paycheck Protection Program Flexibility Act of 2020, P.L. 116,-142, which became law June 5 and made significant changes to the PPP.

June 30 is the final deadline for applying for a PPP loan, but borrowers need to move quickly because lenders will need time to try to get applications into the SBA system before midnight Tuesday. Some lenders already have stopped accepting applications. The recording of the latest Town Hall Series webcast from June 25 discusses some of the available lenders who are still accepting applications. The SBA lender match tool, available on the SBA website, can be used to connect borrowers with lenders.

Frequently Asked Question No. 49 was added Thursday to the Treasury and SBA PPP guidance and discusses maturity dates. FAQ No. 49 states that if a PPP loan received an SBA loan number on or after June 5, 2020, the loan has a five-year maturity.

If a PPP loan received an SBA loan number before June 5, 2020, the loan has a two-year maturity unless the borrower and lender mutually agree to extend the term of the loan to five years. The FAQ states that the promissory note for the PPP loan will state the term of the loan.

Loan calculations

Meanwhile, FAQ No. 10 on the Treasury and SBA guidance on how to calculate maximum loan amounts by business type applies to self-employed individuals whose businesses were in operation on Feb. 15, 2020, but were not in operation from Feb. 15, 2019, to June 30, 2019, and will file a Form 1040 Schedule C or Schedule F for 2020.

The FAQ explains that the maximum PPP loan amount in this case would generally be equal to 2.5 times the business's average monthly payroll costs incurred in January and February 2020, plus the outstanding amount of any Economic Injury Disaster Loan (EIDL) received between Jan. 31, 2020, and April 3, 2020 that will be refinanced by the PPP loan, less any EIDL Advance received.

The FAQ also provides a process for calculating the loan amount.

Questions 1, 2, 4, 5, 6, and 7 in the guidance on how to calculate loan amounts also were updated to reflect the 24-week covered period that was established with the Paycheck Protection Program Flexibility Act of 2020.

The PPP in brief

Congress created the PPP as part of the $2 trillion Coronavirus Aid, Relief, and Economic Security (CARES) Act, P.L. 116-136. The legislation authorized Treasury to use the SBA's 7(a) small business lending program to fund forgivable loans of up to $10 million per borrower that qualifying businesses could spend to cover payroll, mortgage interest, rent, and utilities.

The loans are available to small businesses that were in operation on Feb. 15 with 500 or fewer employees, including not-for-profits, veterans' organizations, Tribal concerns, self-employed individuals, sole proprietorships, and independent contractors. Businesses with more than 500 employees in certain industries also can apply for loans.

Congress designed the loans to support organizations facing economic hardships created by the coronavirus pandemic and assist them in continuing to pay employee salaries. PPP loan recipients can have their loans forgiven in full if the funds were used for eligible expenses and other criteria are met.

AICPA experts discuss the latest on the PPP and other small business aid programs during a weekly virtual town hall. The webcasts, which provide CPE credit, are free to AICPA members. Go to the AICPA Town Hall Series webpage for more information and to register.

The AICPA's SBA Paycheck Protection Program Resources page houses resources and tools produced by the AICPA to help address the economic impact of the coronavirus.

For more news and reporting on the coronavirus and how CPAs can handle challenges related to the outbreak, visit the JofA's coronavirus resources page or subscribe to our email alerts for breaking PPP news.

Ken Tysiac (Kenneth.Tysiac@aicpa-cima.com) is the JofA's editorial director.

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