￼COVID-19 Relief Programs:
Last Friday, President Trump signed a bipartisan bill to reform the Paycheck Protection Program (PPP). On Monday, the heads of both the Small Business Administration and the U.S. Department of Treasury issued a joint statement explaining that they would provide new rules and guidance relating to PPP loans. In addition to new rules and guidance, there will be a new modified borrower application form and a modified loan forgiveness application. While these rules and documents have not yet been published, the joint statement outlines some of the important changes to be made:
1) The covered period for loan forgiveness will be extended from eight weeks after the date of loan disbursement to 24 weeks after the date of disbursement. Borrowers who have already received PPP loans will retain the option to use an eight-week covered period.
2) The requirements that 75 percent of a borrower’s loan proceeds must be used for payroll has been reduced to 60 percent. Additionally, if a borrower uses less than 60 percent on payroll, they will still be eligible for partial forgiveness.
3) There will be a safe harbor from reductions in loan forgiveness based on reductions in full-time equivalent employees for borrowers that are unable to return to the same level of business activity the business was operating at before February 15, 2020.
4) There will be a safe harbor from reductions in loan forgiveness based on reductions in full-time equivalent employees, to provide protections for borrowers that are both unable to rehire individuals who were employees and unable to hire similarly qualified employees.
5) Extend the deferral period for borrower payments and increase the date PPP loans mature to five years.
According to the National Bureau of Economic Research, the United States economy is officially in a recession – ending a historic 128 months of economic growth. While this news does not come as a surprise due to the sharp economic downturn that came as a result of state responses to the COVID-19 pandemic, many were shocked by the Bureau of Labor Statistics May jobs report. According to the report, which pushed the S&P 500 into positive numbers for the year and the Dow Jones Industrial Average to trim its 2020 losses to 3.3 percent, payroll employment rose by 2.5 million jobs and the unemployment rate declined by 1.4 percent to 13.3 percent. These numbers come as a shock since many economists had expected the unemployment rate to jump to about 20 percent. As states continue to ease stay-at-home restrictions, the next few weeks will be crucial in determining the trajectory of the economy moving forward and whether we can continue this positive momentum.