On June 5, 2020, the president signed into law the Paycheck Protection Program Flexibility Act after it passed the Senate with a unanimous vote. The bill drafted by the House extends certain provisions of the Paycheck Protection Program (PPP) to provide small businesses with relief in the timeframe and use of their PPP loan funds.
The most notable changes of the PPP Flexibility Act were:
- Extension of the period to use funds from 8 weeks to the earlier of 24 weeks or Dec. 31, 2020, which provides relief for businesses with longer payroll schedules and greater leeway to reach maximum forgiveness.
- Decrease in required use of funds for payroll from 75% to 60% – but the 60% is a cliff, meaning 60% of funds must be used for payroll expenses or none of the loan is forgiven. The first iteration of the PPP required 75% of the funds be used for payroll or only part of the loan would be forgiven. Some senators are still pushing for a sliding scale, which could result in an edit to the bill at a later date.
- Deferment of payroll taxes for those who receive loan forgiveness, which was not allowed as part of the original CARES Act.
- Extension of June 30 rehiring deadline to Dec. 31, giving employers more time to restore their workforce as the economy begins to reopen at various stages across the states.
- Increased leeway on loan forgiveness for demonstrating rehiring challenges or reopening challenges including:
- Inability to rehire an individual after a good faith effort who was an employee as of Feb. 15, 2020.
- Inability to hire similarly qualified employees on or before Dec. 31, 2020.
- Inability to return to same level of business activity prior to Feb. 15, 2020.
- Increase of minimum loan maturity to 5 years from 2 years (the interest rate remains 1%).
June 30 remains the deadline for applying for a PPP loan. For assistance with your forgiveness application, reach out to us.