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PPP Forgiveness Rules Changed- Again!

On June 3, 2020, the Senate passed the House version of the Paycheck Protection Flexibility Act.  This bill will expand the provisions of the Paycheck Protection Program in several key ways to make it easier for small businesses to qualify for forgiveness.  Here is a quick summary of the changes:

  • The 8-week forgiveness period can be expanded to 24 weeks at the borrower’s discretion.
  • The payroll expenditure requirement is dropped from 75% to 60%.  That means that 40% of the total qualifying expenses can now go towards rent, utilities, and other qualifying costs.  However, this threshold now becomes a cliff.  If you do not meet at least 60% in payroll costs, NONE of the loan is forgivable. 
  • Borrowers can use the 24-week period to restore their workforce levels and wages to pre-pandemic levels necessary to qualify for full forgiveness.  This must be done by December 31, a change from the previous deadline of June 30.
  • This bill also adds two new exceptions for businesses not able to restore their full workforce in certain conditions.  Previous guidance provided exceptions for employees who turned down good faith offers for rehire.  This bill also allows borrowers to adjust because they could not find qualified employees or were unable to restore business operations to February 15, 2020 levels due to COVID-19 related operating restrictions.
  • Borrowers will now have five years to repay the loan instead of two.  Interest rate remains at 1%.
  • Borrowers can now defer the employer’s share of FICA payroll taxes for two years.  Half of the payroll taxes will be due in 2021, and the rest in 2022.  The original law had restricted PPP recipients from using this benefit of the CARES Act. 

As you can see, this new bill offers quite a bit of flexibility for small businesses, which should help more qualify for full forgiveness.  As with everything in this process, more guidance will be forthcoming, and we’ll pass it along as soon as it comes out.  If you have any questions about how any of these changes may impact your business, please don’t hesitate to ask. 

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