In light of the recent jobs report that confirmed unemployment has only dropped to 13.3%, and thousands of small businesses closing their doors permanently, it is clear that changes must be made to help save jobs.
The Paycheck Protection Program (PPP), a $US660 billion federal government initiative, will play a vital role in ensuring the protection of more jobs. Those who will benefit are small businesses, non-profit organizations, veterans organizations, sole proprietors, independent contractors, and self-employed persons.
PPP was first introduced in March under the Cares Act and, according to government data, has approved loans for more than 4 million businesses. However, speaking in testimony before the Senate Small Business Committee, Treasury Secretary Steven Mnuchin has recently announced three big changes to provide further relief:
- The first is that the Trump administration does not plan on releasing the identities of businesses that benefited from PPP. Mnuchin’s explanation, “We believe that that’s proprietary information, and in many cases for sole proprietors and small businesses, it is confidential information”.
- The second change is that more business owners will be eligible to have their loans partially forgiven. PPP mandated that 75% of the loan must be used exclusively for payroll to ensure forgiveness but that percentage has now been dropped to 60%. Furthermore, Mnuchin told lawmakers that business owners may still be eligible for forgiveness as long as they can demonstrate that 60% of the loan was helping to keep their employees’ jobs. No fees will be charged and loan repayments will be deferred for six months. These loans have an interest rate of 1% and a maturity of 2 years.
- The third big change announced is that guidance will be released to allow more people with criminal records to be eligible for PPP. Originally, those with a criminal conviction during the past five years were barred from participating in the program, but Mnuchin testified that it would now be scaled back to three years.
Forgiveness will be contingent on whether the employer maintains a continuing full-time headcount. If employee numbers or salary/wage levels drop then forgiveness will be reduced.