The bare basics of the PPP loan are as follows: The PPP loan has an interest rate of 1% with a minimum five-year maturity rate and a maximum maturity rate of ten years (from the date you apply for loan forgiveness). The covered period—the time during which you can apply for and a lender can grant a PPP loan—is February 15, 2020, to December 31, 2020.
The loan’s intended purpose is to support payroll costs, interest on mortgages, rent, and utilities, with 60% of the loan going to payroll. Funding should be spent within the first twenty-four weeks of the loan’s term, beginning on the date the funds are received. Though interest will still accrue, payments on principal and interest are deferred for ten months.
If you reduced your full-time employee (FTE) count, between February 15, 2020, and April 26, 2020, you have until the last day of the year to bring your count back up to where it was originally. The aforementioned window also allows you to restore any reduced salary or wages, which could also jeopardize a portion of your loan forgiveness if not rectified.
A lower FTE count could reduce your chances of receiving full loan forgiveness, unless you can document that you were unable to rehire individuals employed by you on February 15, 2020, or that you could not hire similarly qualified individuals on or before December 31, 2020. You would also be exempt if you can prove that you are unable to return to your original working capacity (your capacity before February 15). The FTE count does not apply to employees who voluntarily resigned, were fired for cause, or voluntarily requested and received a reduction in hours.
Please note that this article has been updated to reflect the Paycheck Protection Program Flexibility Act, which was signed into law on June 5, 2020. For a comparison of the original PPP loan terms to the Flexibility Act’s new terms, please click here.