Big Changes to PPP Loan Forgiveness
June 5, 2020
Big Changes to PPP Loan Forgiveness
On Wednesday, June 3, 2020, the Senate passed the “Paycheck Protection Program Flexibility Act of 2020” that drastically changes some of the requirements for PPP Loan forgiveness, mostly for the better. The president is expected to sign the Flexibility Act in the next few days.
Here are the key takeaways:
1) Twenty-Four Weeks to Use PPP Funds
Originally, PPP fund recipients had only eight weeks from the date of funding to use the entirety of the PPP funds, for qualifying reasons, if they wanted to obtain forgiveness.
The Flexibility Act allows PPP fund recipients to extend that eight-week period to 24 weeks. While not explicitly stated in the Flexibility Act, this would mean that, instead of only being able to pay employees eight weeks worth of pay (8/52 of $100,000) with PPP funds, this would expand to being able to pay employees 24 weeks worth of pay (24/52 of $100,000) with PPP funds.
Looking at the numbers, the maximum use of PPP funds per employee would change from $15,384.61 (8/52 of $100,000) to $46,153.84 (24/52 of $100,000). For several PPP fund recipients, this will make it easier to utilize all PPP funds on forgivable expenses.
2) Required Payroll Costs Drop From 75% To 60%
Originally, PPP fund recipients had to use at least 75% of their PPP funds on payroll costs in order to obtain full forgiveness. The Flexibility Act drops that requirement down to 60%. However, if a PPP fund recipient does not spend at least 60% of the PPP funds on payroll costs, then they cannot receive any forgiveness.
3) Twenty-Four Weeks To Restore Workforce
PPP fund recipients originally had eight weeks or until June 30, 2020, to restore their workforce to pre-pandemic levels. The Flexibility Act extends that time frame to 24 weeks or Dec. 31, 2020.
4) Expansion Of Exceptions To Not Restoring Full-Time Equivalent Employee Number
PPP fund recipients originally had to maintain the same number of pre-pandemic FTE employees (with a few exceptions) in order to obtain maximum forgiveness.
Under the Flexibility Act, PPP fund recipients do not have to restore FTE employees to pre-pandemic numbers if they can document that they were:
• Unable to rehire individuals who were employees with the company on Feb. 15, 2020
• Unable to hire similarly qualified employees for unfilled positions on or before Dec. 31, 2020
• Unable to return to the same level of business activity that the business was operating at before February 15, 2020, due to compliance SHHS, CDC, or OSHA health and safety measures established between March 1, 2020, and Dec. 31, 2020
5) Five-Year Loan Repayment
Originally, PPP fund recipients who did not qualify for forgiveness were required to repay the loan at 1% interest within two years. The Flexibility Act extends that repayment time frame to five years.
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If you are looking for previous guidance on the use of PPP funds or you have other business/employment law-related questions, feel free to view other relevant articles here.
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