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Will Congress Ease PPP Loan Forgiveness Rules?

May 2020
Practice Management Financing
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May 6, 2020

Enacted on March 27, the Paycheck Protection Program (PPP) was designed as a lifeline for dental/specialty practices and other small businesses devastated by the economic impact of the coronavirus to stay afloat and keep employees on the payroll. While most practices did not receive forgivable loans during the initial $350 billion round of funding, many more are receiving loans during the $320 billion second round of funding which was added due to overwhelming demand.

Under the initial PPP rules, these loans are forgivable if spent on qualifying expenses, including payroll, rent, utilities, and interest, over an 8-week period. Congress directed the SBA to issue final rules for loan forgiveness within 30 days of enactment, or by April 26. Unfortunately, that date has come and gone without the required guidance from the SBA, leaving practices in the dark regarding the rules necessary to qualify for maximum loan forgiveness. Moreover, the limited guidance issued by the SBA has changed on multiple occasions, sowing confusion regarding the rules of the game.

This uncertainty is ramping up as more states are allowing practices to reopen. Fortunately, Congress is returning to work and planning to target shortcomings in the PPP program.

Proposals include extending the number of weeks which practices have to spend the PPP funds from 8 to 12, or even as many as 24. A more important proposed change would allow practices to start the 8-week clock once they reopen and rehire staff, rather than when the loan is funded, in line with recommendations from the American Dental Association (ADA) and American Institute of CPAs (AICPA).

Other proposals would reduce the percentage of funds required to be spent on payroll costs down from 75%, so that more can be used to meet other overhead expenses. Meeting the 75% test has been problematic for practices that received funding while they were under state mandated governmental closings and/or stay-at-home orders.

While the probability of these rule changes being enacted is far from certain, we believe it’s likely that at least some of these favorable changes will be made. We will continue to keep you updated on the most recent developments.

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