On Wednesday, June 3rd, the Senate passed the House version of the Paycheck Protection Flexibility Act, which is now headed to President Trump to sign into law. The act provides for major changes to the popular PPP Loan’s forgiveness rules, and makes it much easier for small businesses to attain full forgiveness of their PPP loans. Almost every provision of the new act provides a relaxing of the rules. The following is a summary of the key take-aways to the new legislation.
- Current PPP borrowers can choose to lengthen the 8 week covered period to 24 weeks. This change will make it much easier for small businesses to get all, or close to all, of the borrowed funds forgiven. Small businesses were complaining that with stay at home orders in effect, that they were unable to use all of their available funds for payroll.
- The second huge change is relaxing the use of funds restrictions on payroll from 75% to 60%. Now small businesses with high rent will be able to use a higher percentage of their loans on rent and utilities and still get full forgiveness.
- The old rules specified that businesses could take up to June 30th to restore their employee counts to pre-coronavirus levels. The new bill pushes that date back to December 30th.
- The act also provides a new Safe Harbor (exemption) to the head count rules for businesses that can not get back to full employment due to new social distancing, health, or safety rules that prevent the business from operating at full capacity.
- The act provides a second Safe Harbor to the head count rules if the business can not find qualified candidates to fill open positions.
- The act turns any unforgiven loan amounts into 5 year loans instead of 2 year loans.
Early reaction from our customers has run the gamut from jubilation to annoyance. Many small businesses had all but given up on spending or getting forgiveness for their PPP funds as much of their workforce was still furloughed, and this act provides a lifeline for them. Other small business owners had brought back employees sooner than they needed to and paid hazard pay and bonuses to use up all the money and are now frustrated that they would have done things differently had these rules been adopted earlier. We believe the impact overall will be positive for the vast majority of our clients. Finally, we can all probably throw all the rules and guidance and even the forgiveness application out the window as these changes will almost surely call for a new round of instruction and guidance.
Helpful Links for PPP Loan Forgiveness:
PPP Loan Forgiveness Application: https://www.sba.gov/sites/default/files/2020-05/3245-0407%20SBA%20Form%203508%20PPP%20Forgiveness%20Application.pdf
PPP Frequently Asked Questions: https://home.treasury.gov/system/files/136/Paycheck-Protection-Program-Frequently-Asked-Questions.pdf
PPP Final Interim Rule: https://home.treasury.gov/system/files/136/PPP-IFR-Loan-Forgiveness.pdf
Disclaimer: The subject matter in this article is subject to change and re-interpretation at any time by the SBA, Treasury, Executive Order, or Congress, and the author may or may not have a chance to update the material between when the changes were made and your reading. This article is meant to provide general guidance on PPP Loan Forgiveness, and the reader should seek specific advice for his or her situation from an attorney, CPA, or SBA representative. Neither the author nor Checkright make any representation or warranty as to the final accuracy or interpretation of the materials herein.
About the author: Arch Wallace is the President and founder of Checkright and has spent almost 20 years employed in the accounting and payroll industry. He can be reached at firstname.lastname@example.org.