Senate Passes Paycheck Protection Program Flexibility Act

Senate Passes Paycheck Protection Program Flexibility Act 

As expected, the Senate has passed the House of Representatives’ version of the Paycheck Protection Program (PPP) Flexibility Act on June 3, 2020.This legislation will remove many restrictions from the original PPP terms while still allowing businesses to maximize forgiveness.  

Key Provisions 
Some of these highlights are recaps of our previous email. Others have clarified the details of the Act. Below are the provisions that have the greatest impact on the PPP loans and forgiveness. 

  • The time allowed to spend PPP funds has increased from eight to the shorter of 24 weeks after receipt of your loan, or December 31, 2020. If you try to get a PPP loan later in the year, this December 31st deadline cannot be extended. 
  • As it stands today, at least 60% of new PPP loans must be spent on payroll expenses, rather than the original 75%. If this is not done, no amount of the loan will be forgiven. Some members of Congress have said removing the partial forgiveness wasn’t intended. There is an expectation that this will be corrected and partial forgiveness will be reinstated in the future. The good news is that borrowers will now have 24 weeks to spend 60% or more of their PPP funds on payroll expenses and the remainder on allowable non-payroll expenses.   
  • The deadline for rehiring or replacing employees and wages/salaries to the levels they were before February 15, 2020 has been pushed back from June 30 to December 31, 2020.  
  • Under this bill, borrowers can make adjustments to their full-time equivalent (FTE) calculations if they have documented proof that they were unable to hire/rehire qualified employees or were unable to regain business levels to what they were on or before February 15, 2020 due to federal social distancing, sanitation, and/or similar requirements. 
  • New PPP loan borrowers will have five years until loan maturity rather than two on any unforgiven amounts. If you already have a PPP loan, you can extend the repayment period to five years if it is mutually agreed upon between you and the lender. The interest rate is still 1%. 
  • The bill allows businesses to delay the 6.2% payroll tax for two years. Businesses can also defer employer Social Security tax payments even if the PPP loan was forgiven prior to December 31, 2020. 

As of June 3, 2020, the Small Business Administration has approved $510.6 billion worth in PPP loans. The program has over $120 billion available in remaining funding. Contact us if you have remaining questions about how the new bill will affect your current or future PPP loan and forgiveness. 

CAPATA is a full-service accounting firm located in Laguna Niguel in southern California.

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