PPP loan window: What if you can’t use all the money?
Lawmakers are looking to extend the 8-week period that business owners have to use the cash
Business owners who received their Paycheck Protection Program loans shortly after funding became available in April are running out on their window to use the cash, and some may not have been able to use it all.
So what happens to leftover money that a business owner was not able to appropriately allocate to allowable business expenses as laid out under the program’s terms?
L.J. Suzuki, the founder of CFOShares.org, told FOX Business that the money essentially becomes a loan.
The first payment on amounts not forgiven through the program come due in 6 months, and the total amount due will be paid over the subsequent 18 months. The debt does accrue interest, but the PPP loan has a 1 percent interest rate, which Suzuki noted is “better than anything you can get from any bank.”
WHO PAYS SOCIAL SECURITY TAXES?
While recipients do have the option of using the leftover amount to pay back the government right away, Suzuki suggests they put it to use within their businesses instead.
“I’m advising my clients to use that excess funding to the extent that it exists as an opportunity for really inexpensive capital,” Suzuki said.
A primary reason business owners may have cash left over is because the loan’s terms currently require that at least 75 percent of the money be put toward payroll costs, while the other 25 percent can be put toward expenses including mortgage interest, utilities and rent. Many business owners may have a hard time putting that much money toward payroll, since some have lost employees and others are running scaled back operations.
CLICK HERE TO READ MORE ON FOX BUSINESS
Meanwhile, lawmakers are debating extending the initial 8-week window that recipients have to use the funds. The House passed a bill last month to extend it to 24 weeks, while a Senate version would increase it to 16 weeks. The House bill also reduces the proportion of the cash that much be put towards payroll to 60 percent.
Forgiveness for the program is prorated.
GET FOX BUSINESS ON THE GO BY CLICKING HERE