Late Wednesday, the Senate passed the Paycheck Protection Program Flexibility Act, which had previously passed the House. The bill is now set for President Trump’s signature.
This legislation amends several provisions of the PPP, the forgivable loan program designed to help small businesses keep their workers on the payroll during the COVID-19 pandemic.
The Payroll Threshold
Under the current regulation, a PPP loan recipient is required to spend at least 75% of the loan on payroll to qualify for full loan forgiveness. The remainder of the loan can be used on certain employee benefits relating to health care, interest on mortgage obligations, rent, utilities and interest on any other existing debt obligations. If a recipient spends less than 75% of the loan on payroll, the difference between the amount spent on payroll and the 75% threshold is not forgiven.
This bill reduces the 75% threshold to 60%, now allowing for up to 40% of the loan to cover eligible non-payroll costs.
Time Period for Loan Forgiveness
This legislation increases the minimum loan term from the current two years to five years, while maintaining the 1% interest rate. Additionally, this bill permits businesses seeking loan forgiveness to defer payroll taxes without penalty for two years.
Additionally, this bill extends the time period for businesses to spend the loan from the current eight-week period to 24 weeks. Current regulation stipulates that to get forgiveness for a PPP loan, the funds must be spent within eight weeks of receipt on qualifying expenses.
This legislation extends the rehiring window from June 30, 2020, to December 31, 2020, giving businesses an additional six months to rehire employees or restore payroll levels without incurring any reduction in the forgiven amount.
Click here for details on how to apply for the PPP.