On May 28th, the Paycheck Protection Program Flexibility Act of 2020, was passed by the House of Representatives. On June 3rd, the Senate passed the bill, and it now goes to President Trump for his signature. If President Trump signs the bill into law, there will be noteworthy changes to the SBA’s Paycheck Protection Program, including the following:
- The “covered period” under which small businesses can spend the loan proceeds will be extended from eight weeks to 24 weeks or until December 31, 2020.
- For small businesses that were unable to rehire employees, hire new employees, or return to the same level of business activity as before the virus, the limits on loan forgiveness will be removed.
- The cap to use PPP funds on nonpayroll expenses, such as rent, mortgage interest, and utilities will be increased from 25% to 40% of the total loan, which will lower the 75% requirement for payroll expenses to 60% to get maximum forgiveness.
- Small businesses will be able to take a PPP loan and also qualify for a separate tax credit to defer payroll taxes, which is currently prohibited to prevent “double dipping.”
- The loan terms for any unforgiven portions that need to be repaid will be extended from two years to five years at 1% interest.
- Small businesses will have more time to rehire employees or to obtain forgiveness for the loan if social-distancing guidelines and health-related actions from the Centers for Disease Control and Prevention or other agencies are preventing the business from operating at the same capacity as before March 1, 2020.
The period for when a business can apply for loan forgiveness will be extended 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. The PPP loan interest, payment of principal and fees will be deferred until the loan is forgiven by the lender.
