PPP Flexibility Act: What You Need to Know

New PPP Flexibility Act Provisions
On June 5, President Trump signed HR 7010 (“Act”) that amends key parts of Payroll Protection Program (PPP) that related to the forgiveness of loans made to small businesses. PPP is part of the Coronavirus Aid, Relief and Economic Security (CARES) Act. The PPP was developed by the US Senate Committee for Small Business and Entrepreneurship and was funded with $350 billion.

Below are the main provisions of the act.
First, the Act extends the June 30 application deadline to apply for the loan to December 31, 2020.

Second, PPP was designed to provide around 10 weeks of cash flow by covering payroll and other expenses during that period of time. Now if a company’s expenses in 10 weeks did not reach its pre-COVID-19 amount, the Flexibility Act extends the period to use the PPP money to 24 weeks.

Third, the Act establishes a minimum maturity of five years for the PPP loan with a remaining balance after any forgiveness. The bill also extends the covered period during which a loan recipient may use such funds for certain expenses while remaining eligible for forgiveness.

Fourth, the Act raises the non-payroll portion of a forgivable covered loan amount from the current 25% up to 40%.

Fifth, the Act extends the period in which an employer may rehire or eliminate a reduction in employment, salary, or wages that would otherwise reduce the forgivable amount of a paycheck protection loan. The forgivable amount, however, is determined without regard to a reduction in the number of employees if a company is (1) unable to rehire former employees and is unable to hire similarly qualified employees, or (2) unable to return to the same level of business activity due to compliance with federal requirements or guidance related to COVID-19.

Sixth, As originally passed, the PPP allowed a company 2 years to pay back money if the loan amount wasn’t forgiven. The Act extends that period to 5 years.

Seventh, the Act allows a company to defer payments until it receives compensation for forgiven amounts. Recipients who do not apply for forgiveness shall have 10 months from the program’s expiration to begin making payments.

Eighth, the Act also eliminates a provision that makes a paycheck protection loan recipient who has such indebtedness forgiven ineligible to defer payroll tax payments.

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