Congress Updates Paycheck Protection Program Loan Rules

Earlier this week, the Paycheck Protection Program Flexibility Act of 2020 — a bill which reforms the Paycheck Protection Program — was signed into law. We had previously covered the act, but are actively monitoring any revisions or reform legislation.

Here are the key aspects of the Act:

  • Extend the “covered period” under which small businesses can spend the loan proceeds from eight weeks to 24 weeks, or until December 31st. (which ever is earlier)
    Payroll costs percentage have now been lowered. The amount that needs to go to payroll in order to qualify for forgiveness has been lowered from 75% to 60%. That means forgivable non-payroll expenses can be as high as 40% of spending, up from 25%. What qualifies as a forgivable expense has not changed.
  • The The PPP Loan Act removes the limits on loan forgiveness for small businesses that were unable to rehire employees, hire new employees or return to the same level of business activity as before Coronavirus.
  • Any unforgiven portions may now be repaid in five years at 1% interest (up from the original 2 years at 1%).
  • Businesses that could not operate at the same capacity as they had before March 1st due to social-distancing guidelines and health-related actions from the Center for Disease Control and Prevention or other agencies are given more time to rehire employees or obtain forgiveness for the loan.
  • Extend the period for when a business can apply for loan forgiveness, from within six months to within 10 months of the last day of the covered period, before it must start making interest and principal payments. Under the new bill, PPP loan interest and payment of principal and fees will be deferred until the loan is forgiven by the lender.

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