Northwest Community Credit Union is honored to provide resources for small businesses in our community through Paycheck Protection Program (PPP) Loans.
Many of the questions the NWCU Paycheck Protection Program staff are receiving from member businesses have to do with understanding when to apply for loan forgiveness.
The SBA is still developing the forgiveness process for lenders. Once NWCU receives those procedures, we’ll send each member business in the program an invitation to our online forgiveness application. We expect that to happen in the coming weeks.
Changes to the Program
The Paycheck Protection Program Flexibility Act of 2020 (PPPFA) helped to change the complexion of the forgiveness process. At this point in time you do not need to take any action. Changes include:
- 24-Week Covered Period. The legislation extended the covered period to 24 weeks after the disbursement date. If your loan was disbursed before June 5, 2020, you may elect to use your original 8-week covered period or the 24-week period. Any loans disbursed after that date have the 24-week covered period. All covered periods end no later than December 31, 2020.
- Use of PPP Funds. Previously, PPP required that at least 75% of the loan proceeds be used for payroll costs in order to be eligible for full loan forgiveness. PPPFA reduces that to 60%. This now means that up to 40% of your loan proceeds may be used for other qualified non-payroll expenses such as business mortgage obligations, rent under lease agreements, and business utilities.
- Exceptions to Reduction in Loan Forgiveness due to FTE Reduction. A borrower may now still qualify for full loan forgiveness if the employee was unable to come back or the business was unable to return to its same level of business due to compliance with social distancing, sanitation, or guidance/requirements issued by Health and Human Services (HHS), Centers for Disease Control and Prevention (CDC), or Occupational Safety and Health Administration (OSHA).
- Extension to Loan Maturity. The Act extends maturities on loans that aren’t forgiven from two years to five years. The borrower and lender must mutually agree to the five year loan maturity.
- Extension of Payment Deferral. Previously, principal and interest payments were deferred for six months from the loan origination date. PPPFA amends this to defer these payments until a determination is made on forgiveness.
- Dates to Apply for Forgiveness. The Act amended forgiveness to have a specific window as opposed to the time between the end of your covered period and the moment principal and interest payments would be assessed. All borrowers now have 10 months from the end of the covered period to submit their forgiveness request.