Congress Passes PPP Flexibility Act
Congress has approved major changes to loan terms for the Paycheck Protection Program and the president is expected to quickly sign the changes into law.
The Paycheck Protection Program (PPP) Flexibility Act provides much more flexibility for small business owners, including:
1.) Changing the percentages of the loan you can use for payroll and other expenses. Currently, three quarters of a PPP loan must be used for payroll, which doesn’t often leave enough for other expenses like rent, utilities, and insurance. The law changes that to a 60 percent payroll /40 percent other expenses split.
2.) Extending the loan forgiveness window from the original 8-week period to 24 weeks. Currently, PPP loan proceeds must be used for expenses in an 8-week span starting when the PPP is funded.
3.) Deferring payroll taxes for businesses who receive PPP loans, helping keep revenue within your business so you can use it to maintain operations and retain employees.
4.) Giving you more time to rehire workers. The new law changes the PPP’s rehiring deadline to 24 weeks or December 31, whichever comes first.
5.) Extending the current two-year timeline to pay back the loan to five years.
We will provide more information on the changes as it becomes available.
SBA releases additional clarification on forgiveness, eligibility review
THE SBA has added additional clarification to its interim rules regarding forgiveness of the PPP Loan and loan reviews.
- If you choose an alternative payroll period to align with your next payroll date after funding, non-payroll costs will still be measured during the original eight week period following disbursement of the loan.
- The SBA may review your eligibility, loan amount, use of proceeds, and loan forgiveness amounts for any size loan at any time. All documents must be saved for six years after the loan is forgiven or repaid in full.
- The SBA may request additional documentation at any time.
- You may appeal the SBA’s determinations with additional guidance on appeal procedures will be issued at a later date.
SBA releases PPP loan forgiveness application
The SBA and Department of Treasury have released the PPP loan forgiveness application (the “Application”).
The Application, which must be submitted by borrowers to their lenders, provides details on how to apply for forgiveness of their PPP loans. SBA will also soon issue regulations and guidance to further assist borrowers as they complete their applications.
Among specific clarifications included in the document:
Borrowers with biweekly payroll may elect to calculate eligible payroll costs using the 8 week period that begins on the first day of their first pay period following disbursement of the loan;
Owner-employee or self-employed individual/general partners must not exceed eight weeks’ worth of 2019 compensation during the 8 week period;
Non-cash compensation payroll costs are limited to employer contributions for employee health insurance and employee retirement plans, and employer state and local taxes assessed on employee compensation;
Full time equivalents (“FTEs”) are considered on a 40 hour per week basis. For the headcount reduction calculation rehire safe harbor, FTEs are counted as of June 30, 2020.
For the salary reduction calculation, borrowers must compare the average annual salary or hourly wage from January 1, 2020 to March 31, 2020 to the average annual salary or hourly wage during the 8-week period. A specific calculation is provided for hourly workers.
You can download the application here