PPP Application Deadline Extended

On Tuesday, March 30, President Biden signed the PPP Extension Act of 2021 into law, which extends the Paycheck Protection Program (PPP) application filing deadline from March 31, 2021, to May 31, 2021. This offers potential PPP borrowers additional time to submit their applications and provides more time for the Small Business Administration (SBA) to process applications. The law does not provide the PPP with any additional funding; however, $7.25 billion in additional funding was recently provided in the American Rescue Plan Act.

PPP basics

The PPP was established in March 2020 by the CARES Act and was designed to help small employers meet their payrolls during the economic crisis caused by the COVID-19 pandemic. PPP loans are available to virtually every U.S. business with fewer than 500 employees and was affected by COVID-19, including: sole proprietors, self-employed individuals, independent contractors and nonprofits.

PPP loans generally are 100% forgivable if the borrower allocates the funds on a 60/40 basis between payroll and eligible nonpayroll costs. Nonpayroll costs originally were limited to mortgage interest, rent, utilities and interest on any other existing debt; however, the Consolidated Appropriations Act (CAA), enacted in late 2020, significantly expanded the eligible nonpayroll costs. For example, borrowers now can apply the funds to cover certain operating expenses and worker protection expenses.

The CAA added an additional $284 billion in funding for PPP loans for both first-time and so-called “second-draw” borrowers (the latter are restricted to smaller and harder hit businesses). It also clarified PPP borrowers aren’t required to include any forgiven amounts in their gross income for tax purposes and borrowers can deduct otherwise deductible expenses paid with forgiven PPP proceeds. In addition, it simplified the forgiveness process by calling for a one-page forgiveness application for loans up to $150,000.

The new law

To recap, the new PPP Extension Act provides no additional funding for the program, though it does extend the filing deadline for both first- and second-draw loan applications to May 31, 2021. The deadline extension will greatly help small businesses, non-profits, and the CPAs serving them to complete existing PPP loan applications and may increase the odds of securing a new loan, particularly for businesses struggling with the application process.

The law also gives the Small Business Administration (SBA) an additional 30 days — through June 30, 2021 — after the extended application deadline to complete its processing of applications. The SBA has a backlog of applications because of a variety of factors, including: coding errors, delays in the release of guidance on implementation of the program and its many changes, and a recent revision of the formula used to calculate an applicant’s loan amount.

Previously, the loan amount was based on an applicant’s net profits, to the detriment of sole proprietors, independent contractors and self-employed individuals whose Schedule C tax forms didn’t show a net profit. In February, the Biden administration announced it was revising the formula to focus on gross profits — the amount of money earned before taxes or expenses are deducted. While welcomed news for applicants, the revised formula required loan processors to make changes, leading to further delays and strain to keep up with demand.

Act now

With the PPP application filing deadline being extended, coupled with several recent reforms which widen the loan eligibility, more businesses have the opportunity to take advantage of PPP loans. Contact a KerberRose Trusted Advisor to help you determine if you’re eligible and ensure you comply with the applicable requirements to qualify for 100% forgiveness. Stay up-to-date by checking out COVID-19 Resources page for more updates and information regarding the pandemic and changes in legislation.

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