On Thursday, March 25, Congress voted to extend the Paycheck Protection Program (PPP) by two months to May 31, 2021, instead of the former date of March 31, 2021. The SBA will have an additional month to process the loan applications by June 30.
This is welcome news to HHM and our clients. The new legislation will provide an extended timetable to determine qualification and obtain the necessary documentation to apply for a loan. Accountants at HHM have the expertise and experience to assist our clients in navigating the loan application process, securing funding, and then applying for forgiveness once loan proceeds have been dispersed for permitted purposes.
The American Institute of CPAs and other groups have been asking Congress to extend the PPP, which received an extra $7.25 billion in funds from the American Rescue Plan Act that President Biden signed into law on March 11. The PPP has provided critical funding to small businesses since it was first introduced in the CARES Act last March by providing businesses with forgivable loans backed by the SBA.
Congress concluded that many vulnerable small businesses still require assistance due to economic volatility caused by Covid-19. Pressure mounted on Congress to extend the program since the Biden administration announced changes to it in February, including a 14-day priority application period for businesses with fewer than 20 employees, an updated loan calculation formula for sole proprietors, and new eligibility rules. The purpose of these expanded rules was to allocate more funding to women and minority owned businesses.
Congress faced criticism with the original PPP loan that too much money went to large businesses. The new law passed in December attempted to address this concern by mandating that funding only go to small businesses with 300 or fewer employees that experienced a 25 percent or greater loss in revenue between comparable quarters in 2019 and 2020.
Despite these efforts, the timing of the reforms brought disorganization and confusion to the lending process. The SBA wasn't ready to accept new applications from these businesses until March 5, providing only a few weeks to take advantage of the loans ahead of the March 31 deadline. These reforms passed by Congress will help to remedy this unrealistic timetable.
In 2021 through March 14, the SBA approved more than 2.7 million loans worth about $181 billion. Over 5 million businesses received forgivable loans in 2020, helping to sustain an estimated 50 million jobs before the program ended last summer.