As the U.S. Senate passed the Paycheck Protection Program Flexibility Act Wednesday night, the bill is at President Trump’s desk for him to sign it. Once he signs the bill, this legislation is expected to have following key impacts on Paycheck Protection Program (“PPP”):
- The legislation extends the 8-week covered period to 24 weeks. Borrowers will have a 24-week covered period or a period ending Dec. 31, 2020, whichever comes first.
- The payroll expenditure requirement drops from 75% to 60%. Now borrowers may use up to 40% of the loan for payment of interest, rents, or utilities. However, the borrowers must spend at least 60% on payroll or none of the loan will be forgiven.
- New borrowers now have five years to repay the loan. Existing PPP loans can be extended up to 5 years if the lender and borrower agree. The legislation does not change the interest rate at 1%.
- The legislation includes two new exceptions allowing borrowers to achieve full PPP loan forgiveness even if they don’t fully restore their workforce. Previous guidance already allowed borrowers to exclude from those calculations employees who turned down good faith offers to be rehired at the same hours and wages as before the pandemic. The new bill allows borrowers to adjust because they could not find qualified employees or were unable to restore business operations to Feb. 15, 2020, levels due to COVID-19 related operating restrictions.
- The legislation allows borrowers to delay payment of their payroll taxes, which was prohibited under the CARES Act.
It is anticipated that the U.S. Small Business Administration (“SBA”) will issue a revised application form and instructions for PPP loan forgiveness. The previously issued form and instructions can be found here: https://content.sba.gov/sites/default/files/2020-05/3245-0407%20SBA%20Form%203508%20PPP%20Forgiveness%20Application.pdf
For more details, please see the bill here: https://www.congress.gov/bill/116th-congress/house-bill/7010/text