SANDY — The path to loan forgiveness just got a lot easier for Utah businesses that secured emergency federal funding to survive the economic fallout of the COVID-19 pandemic.
At a media event Tuesday, Rep. Ben McAdams, D-Utah, walked through the changes to the stimulus-backed Paycheck Protection Program that were signed into law late last week by President Donald Trump after finding congressional approval in separate but similar legislative efforts.
McAdams has been a forward advocate for the changes, noting the initial requirements for Utah small businesses to earn forgiveness of the loan debt, which included using the funds within eight weeks after receipt, were just too stringent to be practical.
“What I heard from many small businesses was they were struggling to spend the proceeds within eight weeks because they either weren’t open yet or were seeing lower customer demand,” McAdams said. “Many retail and restaurant loan clients received their funds in mid-April and their businesses weren’t even fully able to open by the eight week deadline.”
Under changes enacted by the Paycheck Protection Program Flexibility Act, businesses have up to 24 weeks to spend that money and the parameters for where that money can be spent have also been loosened. While the original mandates required borrowers to spend a minimum of 75% of the loans on payroll, the new rules drop that to 60% and allow up to 40% of the funding to be used on other overhead expenses like utilities, rent, mortgage interest debt and other items.
Marla Trollan, director of the U.S. Small Business Administration office in Utah provided further details on the new Paycheck Protection Program revisions. In addition to the spending window expansion and expense percentage changes, borrowers now have the option to extend loan payback term from two years to five years; small businesses can take a Paycheck Protection loan and also qualify for a separate, recently enacted tax credit to defer payroll taxes; the “safe harbor” for rehiring furloughed or laid-off workers has been extended to Dec. 31, 2020; and confirms June 30, 2020 as the deadline for new loan applications.
Trollan said her office has been getting questions from business owners who had loans originate before the rule changes about whether they can secure the same terms for their debt.
“The answer is yes,” Trollan said. “As long as the borrower and lender agree to the new terms. A lender can’t force a borrower to the new terms, nor can a borrower force the lender to new terms.”
As of June 6, the U.S. Small Business Administration reports that over 48,000 Utah businesses have collectively secured some $5.2 billion in loans under the program. Nationwide, 4.5 million businesses have been approved for over $511 billion in Paycheck Protection funding.
McAdams said even with passage of the Paycheck Protection Program changes, he believes there are further issues to address and has been hearing from business owners that the paperwork involved with securing loan forgiveness was “cumbersome.”
“We should also do more,” McAdams said. “We could reduce the red tape even further by adopting a streamlined forgiveness application for those with loans of less than $350,000.”
The Utah Bankers Association has shared similar concerns over the loan forgiveness process and late last month, association President and CEO Howard Headlee told the Deseret News the work required of both businesses and lenders to complete the forgiveness application process was “undue” and overly complicated.
“The burden they’ve outlined falls first on the borrowers, which we believe is undue and then transfers to the local bank, where the loan resides and eventually will get passed to the Small Business Administration,” Headlee said. “Like some of the issues we saw when the first round of the program launched, it’s unnecessarily complicated.”
McAdams and a handful of other congressional members attempted to make that streamlining part of the legislative effort but he said the Senate moved unexpectedly quickly last week before the new provisions could be included. He’s hoping the U.S. Small Business Administration and U.S. Treasury, the agencies overseeing the program, will make the necessary administrative changes to lift the bureaucratic burden.
Trollan said that the work to do just that was underway and said changes could be announced in the next few days. She also noted that that some $100 billion in funding is still available.
Utah businesses looking for assistance in navigating the Paycheck Protection Program can get free help from the Utah Small Business Development Centers network, which operates 14 offices throughout the state. Further details can be found on the agency’s website, utahsbdc.org.