June 29th, 2020 – Extended Payroll Protection Program [2:51]

SUMMARY: Firm founder, Cecil Nazareth, CPA, MBA explains the three phases of the Payroll Protection Program and what the important extensions mean to you. 

The Payroll Protection Program (PPP) has been one of the most important and impactful programs introduced during the COVID-19 crisis—if not in recent memory. The PPP program was rolled out very quickly in March of 2020. Despite a lot of confusion among filers, banks and financial advisors, thousands of heavily impacted firms and small businesses availed themselves of the program and millions of jobs were saved. The PPP program was so popular and badly needed, its emergency funds were depleted in a matter of days and the government has had make continuous changes to the law.

Put simply, there are important phases you should know about:

1. The approval phase,
2. The usage phase
3. The forgiveness phase.

Each phase has its pluses and minuses, so please stay tuned and continuously visit the SBA website www.sba.gov because the PPP program is changing often.

Phase 1: Approval Phase. Most of us already have the loans. If not, the original deadline of June 30th was recently extended for another five weeks until August 8th.

Phase 2: Usage Phase. So, the question is: Once you get the loan, how do you use it? Originally 75% of your PPP loan had to be used for payroll and 25% for rent, utilities and any other incidental expenses.  The ratio was recently relaxed to 60/40 (i.e. now only 60%of the PPP loan is required to be used for payroll and up to 40% can be used for legitimate non-payroll business expenses such as rent, utilities and other incidentals.

Phase 3: Forgiveness. When the PPP program as first introduced in March, small businesses had to use their money within eight weeks for the loan to be forgiven, now they have until December 31st of 2020. That gave small businesses a lot of opportunity to use that money more efficiently as their businesses expand or contract. When it comes to PPP loan forgiveness, you’ll need to file Form 3508 or 3508-EZ. Please work with your local banker to get this forgiveness piece completed. These forms are SBA forms—not IRS forms.

Contact me any time if you or someone close to you has concerns about applying for or properly using, PPP loans.