On Friday, June 5, the Paycheck Protection Program Flexibility Act of 2020 was signed into law by President Trump. The bill passed the House last week and cleared the Senate on Wednesday with a unanimous vote. It provides increased flexibility to current and future recipients of Paycheck Protection Program (PPP) loans.
Below is a summary of the prior PPP rules and the revisions made in the new bill:
| Old Law | New Law |
|---|---|
| Loan term of two years. | Loan term of up to five years for new PPP loans. Existing loans may be extended up to five years if the borrower and lender agree. |
| Covered period of eight weeks to spend PPP loan funds. | Retroactive change to extend covered period to the earlier of 24 weeks or December 31, 2020. Existing borrowers may elect to continue using eight-week covered period if desired. |
| At least 75% of loan proceeds must be spent on payroll costs to be eligible for maximum loan forgiveness. | Retroactive change to require at least 60% of loan proceeds be used for payroll related costs to be eligible for maximum loan forgiveness. |
| Loan forgiveness amount is reduced if there is a drop in FTEs or payroll costs during covered period. Exception available for employees who turned down bona fide offers for re-hire. | Two additional exceptions have been added regarding a drop in FTEs: 1.) inability to find qualified employees for the unfilled positions by December 31, 2020; and 2.) inability to return to same business activity levels by December 31, 2020 due to COVID-19 safety guidelines (e.g. social distancing, sanitation, customer safety, etc.). |
| No timeframe for completing loan forgiveness application. | Forgiveness application must be completed within 10 months after the covered period ends. Applies to new and existing loans. |
| PPP loan recipients were not eligible for payroll tax deferral after loan forgiveness occurs. | New and existing borrowers are eligible for payroll tax deferral, even after loan forgiveness occurs. |
As of June 3, the Paycheck Protection Program has provided over 4.5 million loans to individuals and organizations, resulting in over $510 billion of funding. There is still over $120 billion in loan funds available for disbursement.
If you have any questions on your current PPP loan or are considering applying for one in the future, please reach out to your advisor at Clark Nuber for up to date information on the latest rules surrounding the program.
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