COVID-19 Funding

Last month it was announced the Paycheck Protection Program (PPP) loan forgiveness application had received a major overhaul. The updates were required to comply with the changes set forth in the PPP Flexibility Act of 2020. Prior to passage, there was feedback that aspects of the program needed to be changed to avoid confusion and make it easier for borrowers to apply. The approved updates include an extended covered period, a 5-year term for new applicants, new FTE Safe Harbor, FTE exceptions, and several modifications to the overall process. One important change was the publication of the new EZ and long-form forgiveness applications.

The COVID-19 pandemic has significantly impacted both individuals and businesses. The various regulations designed to curb the spread of the coronavirus has impacted nonprofits in ways that were impossible to predict. Over the past few months, statewide restrictions on large gatherings combined with stay at home orders have left many cut off from essential fundraising activities.

To help businesses survive, the Small Business Administration (SBA) announced businesses could apply for an Economic Injury Disaster Loan (EIDL) and emergency grants. While originally meant to help those impacted by natural disasters, the criteria were changed allowing businesses to apply immediately. The program was initially successful as 70,000 loans for more than $4B dollars was issued while 148,000 emergency advances were issued for more than $468M. Although funding lapsed Congress allocated an additional $60B to program, but new applications were not accepted. On June 15, 2020, the SBA announced that new applications would be accepted.

After months of enduring forced business closures and stay at home orders, there appears to be light at the end of the tunnel. While Georgia was one of the states that started the reopening process earlier than most it has been a slow journey to “normal”.

The Paycheck Protection Program (PPP) has been an effective tool in helping Atlanta and Georgia businesses manage cash flow and working capital during the COVID-19 pandemic. In fact, the Small Business Administration (SBA) reported on May 31st they have issued more than 136,000 loans totaling more than $13B. These numbers are stunning and also reflect the immediate need faced by borrowers.

Right before the Memorial Day weekend, Treasury issued an updated Interim Final Rule on loan forgiveness requirements (the Rule). The updated rule includes information about the Alternative Covered Period, bonuses and hazard pay, full-time equivalent (FTE) reductions, and more.

At long last, borrowers now have the information needed to review spending policies and begin preparing the forgiveness application. There were a number of topics addressed including a new Alternative Covered Period, 75%/25% expense allocation update, documentation requirements, and a new FTE Reduce Safe Harbor.

For businesses and nonprofits, the Paycheck Protection Program has been a source of much needed funding to stabilize operations during the COVID-19 emergency. In fact, during the initial round of funding over 48,332 loans totaling $9.4B were approved for Georgia applicants alone. These loans have been essential in helping small businesses manage payroll and other necessary expenses. However, there was also unwelcome news when it was reported that publicly traded companies had received $365M in PPP loans.

The new round of funding means that businesses not able to previously receive a loan will now have the opportunity to do. However, the timeframe for application preparation is short as the SBA announced applications will start being accepted on Monday, April 27, 2020, at 10 EST.

The announcement that the initial $349B in funds had been exhausted also served as an important reminder to recipients about the loan forgiveness process. The rules require borrowers to spend at least 75% of funds on payroll expenses and no more than 25% on qualifying mortgage interest, rent, and utility expenses. However, many questions have emerged about best practices for managing loan funds to ensure loan forgiveness.