PPP Flexibility Act heads to President’s desk

In rare show of bipartisanship, Congress overwhelmingly supports relief effort

On Wednesday, the Senate cleared legislation to modify and ease restrictions on the emergency small business loans intended to avert mass layoffs during the COVID-19 pandemic. Included as part of the $2.2 trillion CARES Act* enacted back in March, the popular Paycheck Protection Program (PPP)** has approved more than $510 billion in loans to date despite a rocky roll out.

In recognition that the Coronavirus has kept businesses sidelined longer than expected, H.R 7010 aims to address concerns surrounding a handful of burdensome rules under the program. The key aspects likely to help ease fears among many businesses are:

  1. Currently, a business must spend the PPP money in eight weeks and keep all staff employed for the government to fully forgive the loan. The new bill proposes an extension to 24 weeks from receipt of the loan or Dec. 31, 2020 (whichever is earlier) to use the proceeds.
  2. Greater flexibility in expenditures by lowering the amount spent on payroll in order to qualify for full loan forgiveness to 60% (instead of the original 75% benchmark)…leaving 40% for non-payroll costs like rent, utilities, etc.
  3. Borrowers whose loans are forgiven would be eligible for the deferral of the employer’s portion of Social Security taxes provided by the CARES Act.
  4. Workforce reductions will no longer necessarily result in a proportional reduction of loan forgiveness. An employer may be exempt from the associated loan forgiveness reduction if they a) rehire terminated employees; b) hire similarly qualified employees for unfilled positions before Dec. 31, 2020; or c) have an inability to return to pre-COVID levels due to compliance with health and safety standards.
  5. Finally, the forgiveness rules are further relaxed with a provision stretching the amount of time employers have to repay their debt. A minimum five-year maturity now replaces the original restrictions that limited the term to two years.

*Coronavirus Aid, Relief, and Economic Security Act

* *Provides companies with forgivable loans that act like grants as long as the majority of the funds are used pay employees

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