PPP UPDATE: covered period extended to 24 weeks! 5 year repayment, 60% payroll minimum

In this 2-minute read:

  • Updates to PPP loan forgiveness rules
  • Extended repayment period for PPP loans
  • New rules on payroll expenditure minimums for PPP loans
  • Breakdown of Paycheck Protection Flexibility Act

The Senate passed H.R.7010, known as the Paycheck Protection Flexibility Act, on June 3, 2020. The bill was signed into law by President Trump on June 5, 2020.

Demand for Paycheck Protection Program (PPP) loans by small businesses has slowed somewhat, as potential borrowers fear being unable to meet the requirements for loan forgiveness, employee rehiring, or are simply worried they may not qualify.

The new legislation makes several important modifications to the PPP program under the CARES Act, intended to adjust for current economic conditions and allow more small businesses to achieve full forgiveness of their PPP loan.

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List of relevant updates to PPP loan forgiveness requirements

  • As of the date of the Act’s enactment, PPP loans with remaining unforgiven loan amounts will now have a minimum maturity of 5 years (previously 2 years). Borrowers and lenders may otherwise independently agree to alter the terms of their loans to conform to this new requirement, if their loans have been agreed upon prior to the passage of the PPPFA
  • The interest rate remains 1%.
  • Small businesses must still apply for PPP loans by June 30, 2020. (Deadline for application remains the same)
  • The “covered period” is extended to 24 weeks; businesses now have 24 weeks to spend their PPP funding (extended from 8 weeks)
  • Businesses have until December 31, 2020 to spend their funding (previously the deadline was June 30)
  • Current PPP borrowers can opt to extend the eight-week period to 24 weeks, or they can adhere to the original eight-week period
  • Payments are deferred until the SBA approves your application for loan forgiveness, or 10 months after the end of your covered period. (Note, interest still accrues during the grace period)
  • NEW borrowers will have a 24-week covered period, but it can’t extend after December 31, 2020
  • Borrowers are now required to spend at least 60% of the funding on payroll costs in order to achieve 100% loan forgiveness. (Previously, the threshold for 100% forgiveness was 75% of PPP funds spent on payroll)
  • Borrowers can use the 24-week period to restore their workforce levels and wages to the pre-COVID levels required for full forgiveness. The deadline for restoring payroll and headcount levels has been extended to December 31, 2020 (previously June 30)
  • The new legislation includes two new exceptions allowing borrowers to achieve full PPP loan forgiveness even if they are unable to fully restore their workforce. (Previously, borrowers were still able to exclude from their forgiveness calculations any employees who turned down good faith offers to be restored at the same hours and wages as before)

    The new law allows borrowers to still be able to meet forgiveness requirements if could not find qualified employees or were unable to restore business operations to pre-February 15, 2020 levels due to COVID-19 related operating restrictions
  • Businesses that get a PPP loan to may now also delay payment of the employer’s share of their 2020 payroll taxes. This was previously prohibited under the CARES Act 

You can read the full text of the new bill here. We will continue to post updates as they come.

NEW PPP FORGIVENESS UPDATE AS OF JUNE 17, 2020

The Treasury released a new IFR and an “easy” version of the PPP loan forgiveness application on June 17, 2020. Please read the full details here.

Here’s how borrowers decide which forgiveness application to use. You may use Form 3508EZ if:

  • You are self-employed and have no employees; OR
  • You did not reduce the salaries or wages of employees by more than 25%, and did not reduce the number or hours of employees; OR
  • You experienced reductions in business activity as a result of health directives related to COVID-19, and did not reduce the salaries or wages of employees by more than 25%.

If you don’t fit into any of the above conditions, you will need to complete and submit the full PPP loan forgiveness application.

It’s not too late to apply for your PPP loan, but hurry! The extended deadline for application is August 8, 2020

If you haven’t applied for your PPP loan and you determine it’s right for you, there is still time. Talk to your lender and get your application submitted ASAP.

Sign up for your Womply Free account and we’ll keep you updated on new funding opportunities. Customer relationships thrive when local businesses and consumers are connected through Womply data and technology.

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