Critical Mission Consulting Says Update to PPP Rules Ease Concerns

DENVER - May 15, 2020 - PRLog -- Over the past several weeks, the SBA's and Treasury's uneven administration and rules guidance of the PPP, created a large amount of uncertainty for many businesses who already applied for and obtained their loan proceeds. A series of rule changes, guidance and press releases by the SBA and Treasury have many businesses giving back their PPP Loan proceeds out of fear they no longer qualify and may be subject to criminal prosecution.  Many other businesses are reluctant to even apply for a PPP loans due to the perceived risks.

​New guidance issued May 13,  met with broad relief from PPP participants, and potential applicants who may be sitting on the fence, meant to relieve PPP loan recipients confusion and anxiety, and is available from SBA at PAYCHECK PROTECTION PROGRAM LOANS Frequently Asked Questions (FAQs) and from the US Treasury website at PAYCHECK PROTECTION PROGRAM LOANS.

There are a 47 questions and answers providing updates and clarifications from the SBA. The top changes with the greatest potential impact are:

• the expansion of the program allowing lenders to increase PPP loans to partnerships to include appropriate amounts to cover partner compensation
• the allowance for seasonal employers to calculate their maximum loan amount using the alternative criterion issued April 28.
• the extension of the safe harbor for returning PPP loans from May 14 to May 18 that gives an opportunity for borrowers that received PPP loans to return them if they are not able to make a good-faith certification of the necessity of their loan requests .
• the SBA guidance for businesses that, together with their affiliates, accepted  PPP funds of less than $2 million, will be assumed to have performed the required certification concerning the necessity of their loan requests in good faith.

While many PPP participants are relieved about the guidance, there is still significant apprehension that additional changes may occur resulting in unexpected non-compliance by businesses who are attempting to act in good faith. As a result, many advisors, including Critical Mission Consulting, Inc., a Denver business consulting firm, are counseling a conservative wait and see approach, when possible.

Critical Mission Consulting, Inc. President, T.J. Agresti, sad about their business clients, "[T]here is nothing that requires businesses to spend their PPP proceeds immediately. We are telling businesses, especially those planning to request loan forgiveness, to hold off on spending their loan proceeds and to wait as long as possible within the 8 week loan forgiveness period." However, some business have no choice but to spend their PPP loan proceeds to keep their business afloat. These business have no choice but to ride out the uncertainty surrounding guidance of the PPP and hope they are compliant with the final rules. Fortunately, the safe harbor for businesses who accepted under $2 million covers over 98% of Phase One loans and over 99% of Phase Two loan according to the SBA. The risks associated with taking a PPP loan may now be acceptable for many more businesses who were in a holding pattern waiting to apply.

There is still an opportunity to apply for and receive forgivable loans from PPP. The program still has $126.5 billion in funding left, according to the Small Business Administration. A careful review,  with advisors, of the application requirements, and the rules on how to obtain forgiveness, if that is the goal, are a must. Forgiveness is available if you use 75% of the loan for payroll but even if you don't want forgiveness, the loan is still inexpensive capital with a 2 year term and an interest rate of 1%.

For more news and reporting on the coronavirus and how businesses can handle challenges related to the Paycheck Protection Program and the pandemic, visit T.J.'s blog page (https://www.criticalmissionconsulting.com/tj-agresti-blog) or go to the Critical Mission Consulting website Coronavirus resources page. (https://www.criticalmissionconsulting.com/covid-crisis-resources.html)