Congress Makes Significant Changes to PPP Loan Program

Last week Congress passed the Payroll Protection Flexibility Act (H.R. 7010).  It is
expected to be signed by the President. The legislation changes significant portions
of the PPP loan program.  Specifically the legislation makes the following changes:

  • Extends the time you can pay for expenses that will be forgiven under PPP from 8 weeks to 24 weeks.
  • You can use the 24-week period to restore your workforce levels and wages to the pre-pandemic levels required for full forgiveness. This must be done by Dec. 31, a change from the previous deadline of June 30th.
  • Payroll expense requirements drops from 75% of loan proceeds to 60%. Stated another way the amount of the loan that can be used for non-payroll purposes increased from 25% to 40%.
  • If you do not use at least 60% of the loan for payroll, you lose your eligibility for forgiveness for the entire loan.  Currently the rule requires 75% of the loan to be used for payroll, but your forgiveness is reduced proportionally if you do not meet this requirement. This is now changed.
  • The legislation includes two new exceptions. The new bill allows borrowers to adjust workforce compliance levels if: 1) you could not find qualified employees or 2) were unable to restore business operations to Feb. 15, 2020, levels due to COVID-19 related operating restrictions.
  • Loan maturity for parts of the loan that are not forgiven has been extended from 2 to 5 years. Interest rate remains at 1%.
  • Businesses with a PPP loan may also delay payment of their payroll taxes, which was prohibited under the CARES Act.

The bill did not:

  • Expand PPP eligibility to companies with more than 500 employees nationwide;
  • Extend existing loans to allow PPP loan holders to obtain more money for costs incurred after their initial 8 week loan period;
  • Allow existing loan holders to file for a second loan or
  • Permit advertising to be a covered PPP loan expense.

We have been told to expect a broader COVID- 19 relief bill before Congress adjourns for the August recess.  However, the politics are becoming more complex.

If you have a PPP loan, we urge you to consult your accountant or business manager to make sure you meet the new guidelines for loan forgiveness.

The new bill can be found HERE.

A discussion of the new law from the Bonadio Group can be found HERE.

 

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