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Updates to the Paycheck Protection Program

| June 8, 2020

Updates to the Paycheck Protection Program

The Senate succeeded in passing the House of Representatives' bill that makes significant changes to the Paycheck Protection Program (PPP) and President Trump signed the legislation making it law on Friday, June 5. The new law will:

  • Reduce the Small Business Administration’s (SBA) payroll cost requirement to qualify for loan forgiveness. The amount spent on payroll is reduced from 75% to 60%. Borrowers must spend at least 60% of the loan on payroll or none of the loan will be forgiven. The SBA may add clarification to this point in their regulations.
  • Extend the time period to use the funds and restore pre-pandemic workforce levels, from 8 to 24 weeks (up until Dec. 31, 2020). The timeline was extended to make it easier for borrowers to reach full or almost full loan forgiveness.
  • Allow PPP borrowers to defer the employer’s share of FICA payroll tax payments for two years. Half of the payroll taxes will be due in 2021; the rest will be due in 2022.
  • Establish a minimum maturity term of five years (instead of two) to repay the loan balance not forgiven. The interest rate will remain at 1%.
  • Provide greater flexibility for borrowers to achieve full PPP loan forgiveness – even if they don’t restore their workforce to pre-pandemic numbers. While the previous legislation allowed borrowers to adjust if former employees turned down offers to reinstate their positions, the new bill allows borrowers to adjust because they were unable to find qualified employee replacements or were unable to restore business operations to pre-pandemic levels.

The SBA and U.S. Treasury will provide clarifying regulations to the Act. As they provide this additional guidance, the Advocacy Council will update you – we have you covered!

The Paycheck Protection Program Flexibility Act of 2020  shall take effect on the date of the enactment of this Act and shall apply to any loan made pursuant to section 7(a)(36) of the Small Business Act (15 U.S.C. 636(a)(36)) on or after such date. 

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