Congress Adds More Flexibility to PPP Loans
Legislation giving small businesses more flexibility and time to use Paycheck Protection Program funds and still qualify for loan forgiveness has won Congressional approval.
The U.S. Senate this week followed the House in passing the PPP Flexibility Act, which makes much-needed adjustments to the financing program, a critical lifeline for many smaller employers.
Many small businesses found the original time frame and payroll limits too challenging for employers that remained unable to fully open because of government shutdown orders, particularly restaurants, bars, and barbers and hair salons.
The bill makes the following changes:
- Extends the deadline to apply for a PPP loan from June 30 to December 31, 2020
- Extends the maturity for a PPP loan to five years from two years
- Extends the covered period to use the funds to 24 weeks (or December 31) from eight weeks after the date of loan distribution
- Raises the portion of the non-payroll expenses that can be paid with the loan to 40% from 25% and reduces the amount that must be spent on payroll to 60% from 75%
- Extends the period in which an employer may rehire or eliminate a reduction in employment, salary, or wages from June 30 to December 31 without reducing loan forgiveness
- Allows for a determination of forgiveness to be made without regard to a reduction in the number of employees if the recipient 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
- Revises the deferral period for PPP loans to 10 months from six months
- Authorizes a delay of employer payroll tax payments through the end of 2020
The U.S. Treasury Department and Small Business Administration are now expected to update PPP rules and regulations and issue new guidance to reflect the changes in the legislation..
The program is part of the Coronavirus Aid, Relief, and Economic Security Act, designed to provide employers with 500 or fewer employees emergency loans to survive the pandemic.
Launched April 3, the program exhausted its original $349 billion funding in 13 days.
The program restarted April 27 after Congress approved an additional $321 billion in funding, of which $160 billion remains available through SBA-approved lenders.
Through the end of May, 4.47 million loans totaling $510.2 billion were approved across the country, with an average loan size of $114,000.
The SBA also approved 8,744 loans totaling $762.8 million in Connecticut through its Economic Injury Disaster Loan program.
For more information, contact CBIA’s Brian Corvo (860.244.1169).
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