Many Texas small businesses have received funds from the federal government pursuant to the Paycheck Protection Program. It is important that business owners understand the rules governing this program and when they can receive loan forgiveness. Recently, Congress passed legislation that would make this program less restrictive and more conducive to small businesses.
One of the major parts of the bill that was causing problems was the requirement that all the money be spent within eight weeks after the loan was received. Businesses were having trouble spending all of the money in a short time because the economy is still partially closed. Now, Congress has lengthened the time period to 24 weeks, making it easier for businesses to spend the money.
In addition, businesses were obligated to use 75% of the loan proceeds on their payroll in order to qualify for full loan forgiveness. Businesses were having difficulty meeting this goal due to the fact that they did not have their workers and would not yet rehire them. Now, the requirement has been reduced to 60%, and businesses have more time to hire back their workers. Finally, Congress has now given business owners more time to repay their PPP loans. Instead of having two years to repay, the time period has now been lengthened to five years, making the terms easier for business owners to fulfill.
Business owners should understand all of the terms of the PPP because it impacts whether it is a loan or can be converted to a grant. A business law attorney may explain all of the requirements of PPP to their client so that they can make sure to comply with them. Given the compressed time frames, business owners need to take immediate action if they want the money to become a grant as opposed to remaining a loan.
