House Passes PPP Loan Forgiveness Bill

House Passes PPP Loan Forgiveness Bill

New legislation called the Paycheck Protection Program Flexibility Act was passed by the House last Thursday, May 27, 2020 by a vote of 417 -1. This new bill proposes to significantly ease restrictions on use of PPP funds to receive the all-important loan forgiveness. So the House passes PPP Loan Forgiveness bill, now what? Well, if the bill is passed by the Senate, which Senate Majority Leader Mitch McConnell says he will be attempting to expedite, it will create a lot less headaches for small businesses that will be requesting PPP loan forgiveness.  Here is what the bill proposes.

Extended Time To Rehire Employees

The original guidelines for the PPP loan set the timeline to rehire employees back by June 30, 2020. While this may be doable for some businesses whose restrictions were eased a lot sooner than others, some businesses, especially restaurants, are seeing that they need more time to ramp back up to be able to bring all their employees back. The bill proposes to change this date to December 31, 2020.

Extended Time To Use Funds

Instead of only having eight weeks to use your PPP funds once received, this new bill proposes  to increase this time period to twenty-four weeks or until the end of the year, whichever comes first. This will allow businesses to hold off on using their funds until they really need to use them. If you weren’t able to fully open within the eight weeks that you received your funds, it doesn’t really make sense to rehire employees during that time just to utilize the PPP funds properly. This will help alleviate this issue that so many businesses were facing.

Loan Forgiveness Changes

One of the biggest changes that this new bill is seeking to change is the guidelines for PPP loan forgiveness.  Currently, businesses are required to spend at least 75% of their PPP funds on payroll during the eight-week period after funds are received and the remaining 25% on other approved business expenses like rent or utilities. This rule wasn’t taking into account the businesses that aren’t able to reopen or return to full capacity during this time. So, the PPP Loan Forgiveness Bill is requesting to lower this threshold to 60% to be used on payroll and 40% on other overhead costs.

Good News If You Apply Now

If you haven’t applied for a PPP loan, as of today June 2, 2020, there are still funds available and the Paycheck Protection Program Flexibility Act will extend the deadline to apply from June 30, 2020 to December 31, 2020 or until funds are exhausted. Another great perk this act will create is extending the loan term from two years to five years. This would only be for the businesses that apply and receive funds after the new act passes. So, if you plan on applying, it may be best to wait until we see where this bill land in the upcoming weeks to allow you take advantage of this repayment feature.

House Passes PPP Loan Forgiveness Bill

The Paycheck Protection Program Flexibility Act is set to be voted on in the Senate in early June. While it is likely the Senate will have their own version which will have to be reconciled through negotiation among Congressional leadership, we expect that the end result will provide much needed relief on many of these areas of concern about PPP.  These much-needed edits to the PPP will, without a doubt, bring on a sigh of relief to so many businesses as they try to navigate the aftereffects brought on by the COVID-19 pandemic. Fingers crossed we see this legislation come to life soon!