More Flexible PPP Loan Spending Terms for Small Biz

The U.S. Senate has passed yet, another version of Paycheck Protection Program (PPP) legislation. The good news is that it now offers  triple the amount time for small businesses to spend the funds while still qualifying for loan forgiveness.

The bill was passed in a unanimous voice vote hours after Wisconsin Sen. Ron Johnson had blocked it. One key provision is a change in the amount of PPP funds required to be spent on payroll costs to in order to qualify for forgiveness of 60% of the loan amount.

Senate approval means this sends the House bill, called the Paycheck Protection Flexibility Act, to President Donald Trump, who is expected to sign it.

Since the Senate is not officially in session, the vote had to be unanimous.  This all came as leaders from both parties in the Senate pushed to pass legislation on Wednesday as the clock for the original eight-week window was se to expire for the first recipients of PPP loans.

The following is a summary of the legislation’s main points compiled by the AICPA:

• PPP borrowers can choose to extend the eight-week period to 24 weeks, or they can keep the original eight-week period. This flexibility is designed to make it easier for more borrowers to reach full, or almost full, forgiveness.
• The payroll expenditure requirement drops to 60% from 75%.but is now a cliff, meaning that borrowers must spend at least 60% on payroll or none of the loan will be forgiven. Currently, a borrower is required to reduce the amount eligible for forgiveness if less than 75% of eligible funds are used for payroll costs, but forgiveness isn’t eliminated if the 75% threshold isn’t met.
• Borrowers can use the 24-week period to restore their workforce levels and wages to the pre-pandemic levels required for full forgiveness. This must be done by Dec. 31, a change from the previous deadline of June 30.
• 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.
• Borrowers now have five years to repay the loan instead of two. The interest rate remains at 1%.
• The bill allows businesses that took a PPP loan to also delay payment of their payroll taxes, which was prohibited under the CARES Act.

So, there you have it. You’ve now got more time and flexibility to spend your PPP loan – so get out there and put it to good use!