Paycheck Protection Program Flexibility Act Signed Into Law

In what is being considered a major win for small businesses, the House version of the Paycheck Protection Flexibility Act was approved by the Senate on June 3, 2020 and signed into law by President Donald Trump today, June 5, 2020. 

Key items addressed in the Act:

• A reduction in the amount of PPP funds required to be spent on payroll to qualify for loan forgiveness from 75% to 60%, changing the restrictions limiting non-payroll expenses from 25% to 40%. At this time, the law does not change the list of expenses eligible for forgiveness.

• The loan repayment window increased to 5 years as opposed to the previous 2 years. The loan interest rate will remain at 1%.

• Businesses that took a PPP loan may now also delay payment of their payroll taxes. Previously, this was prohibited under the CARES Act.

• Borrowers may choose to extend the current forgiveness period from 8 weeks to 24 weeks. The 24-week period can now be used to restore workforce numbers and employee salaries to pre-COVID levels. The deadline for restoration has also changed from June 30, 2020 to December 31, 2020.

• The bill includes new exceptions for borrowers to achieve forgiveness if they are unable to restore their workforce. PPP already included exceptions for former employees who turn down written offers of reemployment, but the new bill allows borrowers to adjust in the event they are unable to find qualified candidates to employ.

Encompass will continue to provide updates as more information is provided.