Additional legislation relaxes terms for paying back loans

By Ruth Melville

The Payroll Protection Program (PPP), part of the $2 trillion stimulus bill passed to help businesses weather the economic crisis caused by the Covid-19 pandemic, has come to an end. The deadline for the second round of funding was June 30, and National Iron Bank was accepting applications up to the deadline.

A key feature of the PPP was that, as long as certain terms were met, the loan was completely forgivable. Briefly put, employers had to keep their employees on the payroll for eight weeks, and the money could only go toward payroll, rent, mortgage interest or utilities. Borrowers had eight weeks after receiving a loan to apply for forgiveness. 

But not all businesses were able to use their loan within eight weeks. For some employers—especially seasonal ones like gardeners, landscapers and roofers—the effects of the pandemic were delayed, and they needed more time to get back up to capacity. 

Businesses affected by the phased reopening of state, like restaurants or country clubs, also had trouble meeting the original deadline.

In response to these concerns, in early June Congress passed, almost unanimously, the Payroll Protection Program Flexibility Act (PPFA), which both eased some of the restrictions on how the money was spent and extended the amount of time to file for forgiveness.

The primary revision is that the period to apply for forgiveness was extended from eight weeks from receipt of the loan to 24 weeks, with a cut-off date of Dec. 31, 2020. The deadline to rehire workers was also extended, from June 30 to Dec. 31. The PPP originally stipulated that 75 percent of a loan had to go to payroll to qualify for forgiveness, but under the PPFA, only 60 percent is required.

National Iron Bank’s Catie Dougan says that “the extension was a relief for our clients and a relief to us, too. It gave us a chance to give each client individualized care. At the National Iron Bank, we’ve been learning as we go. The biggest thing is that we’ve streamlined the process.” The bank is working on putting a link on their ibanking page, so that forgiveness applications can be filed online. Through the bank’s internal systems, part of the application will be filled out automatically, which will further simplify the process for both the clients and the bank.

Dougan adds that it is important for businesses applying for forgiveness to document all their costs. The bank recommended to their clients that they keep the PPP funds in a single account to aid accurate record keeping.

Ryan Craig, owner of the Berkshire Country Store, received a PPP loan through National Iron Bank. He says that the loan did exactly what it was designed to do: keep him in business and keep his employees working. He used the money exclusively for payroll, and he didn’t have to lay off any of his 11 employees.

Craig said that, for him, the entire process went very smoothly. He received his loan the week after his application was filed. The relaxed rules in the PPFA didn’t really affect him, since just as his loan money ran out, the state of Connecticut started to reopen, and he saw an instant, and welcome, surge in business. 

The process did not go quite as smoothly for Dave Beers, manager of Connwood Foresters. Working with a different bank, he found the requirements confusing, as did his accountant, to whom he eventually said, “Just tell me what to do” to be sure the loan is forgivable. Beers received his loan on April 24, and at the time Connwood was still busy with pre-pandemic work. No one canceled, and the company was able to work on full-time. The work load slackened at the end of May, for two reasons: the timber market collapsed, and the company temporarily lost some big clients, particularly CT Water, which decided to shut down all nonessential work because of the pandemic. But with the PPP money, and unused vacation time, the company will be able to keep going for another month or two. By then, he hopes, business will have picked up again.