Borrowers need not pay interest at the otherwise applicable six months after loan date.
Most PPP borrowers are aware that they will not pay interest on loans that are eventually forgiven by reason of paying expenses that are eligible to cause forgiveness.
The promissory notes signed by most PPP borrowers have provided that interest would be deferred for only six months.
The Payroll Protection Program Flexibility Act that became effective on June 5th provided an extension of the deferral period until the SBA remits the loan forgiveness amount to the lender, but was not specific as to whether promissory notes issued prior to the passage of the Flexibility Act would have to be amended to allow for the additional deferral period to apply.
On October 7th, the SBA added Question #52 to the FAQ Document to confirm that the additional interest deferral will automatically apply without the need to modify a promissory note.
In other good news for borrowers, the SBA reportedly issued a letter on October 6th to indicate that it had begun to confirm forgiveness for borrowers who have filed their forgiveness applications, and have had their banks approve and forward their applications to the SBA.
The second most recent Question, #51, was posted on August 11th to simply indicate that group health care benefits include payments made for vision and dental benefits.
The above follows the announcement of Saturday, October 3rd, which indicates that borrowers should not allow a transfer or change of ownership of the borrower entity of more than 20%, or a sale or transfer of assets of the borrower exceeding 50% of the value of those assets without getting bank approval and following the guidelines that are discussed in my October 4th post, which you can be read by clicking here.
I recently completed two charts that summarize the transfer rules contained in the SBA Notice:
For borrowers that do not get full forgiveness, the loan will have a 2-year maturity if made before June 5, 2020, while loans made on or after June 5th will have a 5-year maturity.
Pre-June 5th borrowers and banks can mutually agree to extend the due date of the loan to five years.
I recently completed a 30-minute Webinar on the new Notice along with Brandon Ketron and Kevin Cameron. You can get the link to see the replay of this Webinar by emailing the subject line “Transfer” to firstname.lastname@example.org.
And now for the Daily Double:
Please budget to pay extra income taxes because the forgivable expenses that you have paid for your PPP loan will not be tax deductible. For example, if you received a $100,000 loan there will be no income on forgiveness, but if you are in the 37% tax bracket your taxes will be $37,000 higher, so the net benefit of the PPP loan is $63,000.
Thank you very much ladies and gentlemen on behalf of all of us. Time to drink your Potent Potables!
Join us next time when Vanna White will bring the letter P to the box where Carol Merrill is now standing – I would love to Make a Deal!
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