Dispatch #43 - Good News: PPP Loan Terms More Favorable Now
The Paycheck Protection Program Flexibility Act of 2020 (PPPFA) was signed into law last Friday and it’s good news for building contractors with PPP loans—more of your PPP loan will likely be forgiven, and you’ll have longer to repay the remainder if any.
This additional profit and cash flow will help construction firms recover from the COVID-19 economic disruption.
Key changes to the program from this law include:
You have 24 weeks to use the funds (increased from 8)
Non-payroll costs can be 40% of eligible expenditures (increased from 25%)
You have until December 31st to rehire employees (formerly June 30th)
Potentially (needs clarification) less forgiveness reduction if your firm cannot rehire all employees by December 31st due to government-mandated COVID-19 related restrictions
Up to five years to repay the unforgiven portion (increased from two) and with repayment starting later than before.
Neil Hare does an excellent job summarizing these changes in this Forbes article.
He advises, too, about the importance of documenting compliance with the program. Despite the recent safe harbor guidance from Treasury and the SBA (see Dispatch #39), this is not a “free pass”, as explained in another Forbes article.
In terms of financial planning and preparedness, here are the actions I recommend:
Revise your PPP workbook and loan forgiveness calculator to reflect the new rules;
Update your cash flow forecast to reflect a higher forgiveness rate (presumably) and new repayment schedule;
Revisit the impact of the PPP loan on your firm’s balance sheet, including your line of credit and bonding covenants;
Continue to document the impact of COVID-19 on your business for purposes of maximum forgiveness and audit defense.
For more information, here’s a link to the full text of the law, and NFIB is sponsoring a webinar on the new rules this Wednesday.
Need help with this or other financial matters faced by construction contractors? Let’s talk!
David Stern CFO makes every effort to provide useful and accurate information. This content, however, is not intended as a substitute for specific business-related financial advice. We disclaim all warranties and liabilities from its use.