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New Details on How to Get Your PPP Loan Forgiven

Inc. logo Inc. 4/3/2020 Kevin J. Ryan
a woman sitting at a table in front of a laptop: New Details on How to Get Your PPP Loan Forgiven © Getty Images New Details on How to Get Your PPP Loan Forgiven

At least 75 percent of your small-business loan must be used for paying your employees, explained Neil Bradley, the U.S. Chamber of Commerce's executive vice president, in Inc.'s latest National Small Business Town Hall.

While the U.S. government continues to work out the details of its stimulus programs for businesses, Friday, April 3 marked the first official day that business owners and solopreneurs can apply for Paycheck Protection Program (PPP) loans through their banks or lenders.

To help small-business owners sort through the rapidly changing details of the PPP, Inc. and the U.S. Chamber of Commerce are hosting National Small Business Town Halls, a series of weekly live webinars.

This week, Inc. editor-at-large Kimberly Weisul spoke with Neil Bradley, the Chamber's executive vice president and chief policy officer, about what's new in the guidance issued by the Treasury Department Thursday night.

Bradley discussed updates on a key point in the legislation: how to use PPP loans to re-hire and pay employees you have already laid off. To be eligible for full forgiveness, he said, businesses must use at least 75 percent of their loan for payroll.

"The goal is to keep these employees connected to small businesses so that when we get through this, it's much easier to get started again," Bradley said.

Bradley cautioned that business owners should be careful not to use the loan money for anything other than what's authorized in their agreement. "It's not clear how that would be enforced," he said. "But if you use it outside of payroll, utilities, rent, etc., you could be putting yourself in jeopardy."

The PPP loan rates initially are being set at 1 percent with two-year terms. That's higher than the 0.5 percent rate mentioned in previous guidance, but lower than the legislation's stated maximum of 4 percent. Bradley said it's possible the terms will change again, but the term you get will not change after you receive the loan.

A major point of contention since the PPP was unveiled has been affiliation standards, which affect venture-backed companies' eligibility for the loans. The way the legislation is currently written, a company's headcount must include not only their own employees, but also employees of their venture investors and their investors' other portfolio companies. In some cases, that pushes their total headcount above the 500-employee threshold and makes them ineligible for PPP loans. Bradley said he expects more clarity on the issue soon.

"This is being discussed at the highest levels of government," he said. "They will be providing further guidance. If you're impacted by this, don't put down the remote."

Bradley also cleared up an important point about 1099 workers: When business owners calculate the size of their PPP loan, they may not include wages paid to independent contractors. Those workers can apply for their own PPP loans beginning April 10. Initial guidance suggested that businesses would count those workers toward their payrolls.

"There has been a lot of confusion about this," Bradley said. "Admittedly, the law was poorly drafted."

Should the $350 billion in PPP loans run out, Bradley believes Congress will work on new legislation for additional proceeds.

Related: Covid-19 Loans: What You Need to Know About 1099 Workers

Related: 4 Options to Resolve Cash Flow Issues Besides Loans

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