The House and Senate recently passed new PPP legislation, The Payroll Protection Program Flexibility Act, signed into law by President Trump on June 5, 2020.
The Senate unanimously passed the legislation last Wednesday night (June 3rd) in a rush knowing that businesses still had until June 30th to apply for funds through the program. Below are some of the highlights for businesses to be aware of in regards to the PPP loan:
Payroll Expenditure Calculation
The requirement of using 75% of your PPP loan towards payroll and related expenses has been dropped to 60% with a cliff. If 60% of your loan is not used towards payroll, none of the loan will be forgiven. Remember that the other 40% must still be used towards the qualified expenses originally listed such as mortgage interest, rent or utilities.
Loan Period Extended
Formerly, the loan period to use these funds was 8 weeks from date of receipt or from the next available payroll. This period has now been extended to 24 weeks or until December 31, 2020; whichever comes first. This extension of time allows borrowers to adjust their employee workforce to pre-pandemic levels.
Also, business owners realize that some employees were making more in unemployment than when hired previously. If employees turned down good faith offers or if employers could not find enough qualified employees, the new legislation allows the borrow to adjust and exclude that information from the final calculation.
Payment Period Extension
Previously, PPP legislation was allowing a 2-year loan period at 1% interest. This period of payback has also been extended to five years. Existing PPP loans can also be extended if both parties agree on the new terms. Meet with your lender to find out.
Legislation can change very quickly, as we have absolutely seen during this economic crisis. It’s a great value to lean on your trusted advisor to stay on top of these changes to ensure you’re making the best choices for your business.
Derek M Oxford | CFP®, AEP®