Paycheck Protection Program: The Moving Target

Still curious about what the Paycheck Protection Program (PPP) is and its evolving journey? Keep reading for more details.

The Small Business Administration (SBA), Paycheck Protection Program (PPP) was created from the Coronavirus Aid, Relief, and Economic Security Act (CARES Act) to help businesses affected by COVID-19 for payroll and other business related expenses. When State’s began shutting down, non-essential businesses couldn’t run, and funds were needed in order to stay afloat.

On June 5, 2020, the Paycheck Protection Program Flexibility Act (PPPFA) was signed into law. The PPPFA amends the Paycheck Protection Program to give borrowers more time to spend loan funds and still obtain forgiveness. Loan forgiveness will be reduced accordingly with any reductions made to a business’s workforce and/or reductions to employee salaries. With all the stipulations on the current workforce as compared to the pre-COVID workforce, there are several other scenarios that could come into play.


The PPP loan can extend from 2 to 5 years if the lender and borrower agree to terms. In other circumstances, the full amount will be due within 2 years of receiving the funds. If you received funds after the PPPFA, then you have up to 5 years to repay the loan. As is usually the case, there are no prepayment penalties if you pay before your term is up.

Some key dates and changes:

  • The first wave of loans was depleted on April 16th.
  • $310 billion approved on April 24th, and was available for application on April 27th, through approved lenders. 
  • June 5th CARES Act amended to enact the Paycheck Protection Program Flexibility Act 2020. Allowing PPP borrowers more freedom with their funds. No payments until submission of forgiveness application to SBA.
  • July 4th, PPP was extended with the Paycheck Protection Program Extension Act. It extended the Paycheck Payment Protection Program to August 8th. 
  • As of August 8th, the SBA no longer accepts applications. Borrowers who received a PPP loan have 10 months from the end of the loan period to apply for loan forgiveness. $525 billion to 5 million businesses in total in loans via SBA data.
  • Loan amounts will be forgiven if it is used to cover payroll costs, mortgage interest, rent, and utilities by December 31st, 2020. The employment roster must be fully maintained. Compensation must be unaltered. Any unauthorized use of PPP will result in the full repayment of loans and charges for fraud. SBA will also act for unauthorized use as well.

Loan Forgiveness

SBA Loan

Currently, the forgiveness program portal is open to receive applications from approved lenders. The current situation has many sitting on the fence and waiting to apply for forgiveness. The SBA has been addressing some frequently asked questions, especially relating to taxes. 

It appears many CPAs are advising loan receivers to wait until “wrinkles are ironed out”. They are advising to keep incredibly well-documented ledgers of the PPP money. CPAs also have a “keep everything” philosophy with receipts and statements.

There have been several businesses that applied for forgiveness and are now immersed in a state of fraud investigations. Many have been caught in pre loan authorization fraud, where the business did not supply proper documentation and the lender did not properly perform due diligence prior to authorizing the loan. This was due mostly to the high influx of applicants in terms of overwhelming volume, lack of staff, and/or lack of expertise. Each of these aspects came together to form a perfect storm where many lending teams still find themselves trying to catch up and identify what may have slipped through the cracks.

Due Diligence Research

While no one could have ever foreseen this pandemic it makes for yet another prime example of why proper due diligence procedures and a second set of eyes can help deter future issues and mitigate risks… especially during times of capacity fluctuations and business environment challenges. It is apparent that much of this could have been avoided if proper research and analysis were done prior to the loans. Even as I write this the environment continues to change.

Additionally, for those buying or selling a business, PPP has brought its own set of complications to their transactions and yet again increased the necessity for definitive information. Many lessons are being learned by all parties involved as we go. If dependable research is important to you or the industries you serve do not hesitate to apply our expertise.