Payroll Protection Program - UPDATE (COVID-19 Alert)
PAYROLL PROTECTION PROGRAM
UPDATE ON FUNDING AND REMEDIES TO PAYROLL CUTS
As of Thursday, April 16, 2020, the nearly $350 billion allocated to fund the Payroll Protection Program (“PPP”, previously discussed in detail here) had been entirely committed. According to the American Bar Association, the Small Business Administration is no longer taking applications, and will not allow new applications to be placed in a queue.
Negotiations are currently under way for a second round of PPP funding of up to $250 billion. If your business or client was unable to access the first round of funding, you should closely monitor congressional negotiations, and have the PPP application ready to be filed.
Anecdotally, we have heard reports of businesses being discouraged from accessing PPP loans because of previous layoffs or furloughs, which could limit or eliminate loan forgiveness under the program.
Importantly, Section 1106 of the Coronavirus Aid, Relief, and Economic Security Act (“CARES Act”), which created the PPP, allows employers who have laid off or furloughed workers to remedy the layoffs by rehiring those workers or hiring replacements.
Subject to timing of the layoffs (between February 15, 2020 and April 26, 2020 compared to payroll over the same period from 2019), if the workers are rehired or replaced by June 30, 2020, the salary allocated for those workers over the two-month period post-hire may still be forgiven. When Congress enacted the CARES Act, it wanted to encourage rehiring for businesses which had already faced payroll reductions at “no cost.”
In sum, if your business or client was unable to access the PPP, stay prepared for a second round of funding. Likewise, if your business or client has faced layoffs, you should still be prepared to access PPP forgiveness by rehiring or replacing those workers. Make sure to have your application ready for the second round of funding. We will continue to provide updates as Congressional negotiations develop.
We remain available to answer your questions on these and other matters. For further information, please contact: