The Paycheck Protection Program Flexibility Act of 2020 has passed the Senate late Wednesday and is now just awaiting a final signature by the President. While I typically do not publish information until it is Law, I feel that this is close enough to the end of the process and the sooner you are aware of these major changes to the spending requirements, different decisions can be made. Here are some of the major changes that will impact your PPP loan and forgiveness when this is signed into law.
1. In place of the 75% payroll costs / 25% non-payroll costs spending requirement of the current PPP, this Act would change the ratio to at least 60% on payroll costs and no more than 40% on non-payroll costs.
2. The covered period of the forgivable use of the funds would extend from the current eight-week period to 24 weeks, or until December 31, 2020, whichever comes first. There are still PPP funds remaining if you have not applied for the loan yet, which is where that December 31, 2020 date could come into play for loans disbursed in July.
3. There will be a new exemption, actually two of them, to meet FTE requirements based on the inability to hire similarly qualified employees for unfilled positions or the inability to return to the same level of business activity due to compliance with requirements or guidance by a government health agency.
4. There is currently a restriction to take advantage of Sec 2302 of the CARES Act which allows a business to defer the employer portion of OASDI (Social Security) tax once the PPP loan is forgiven. This Exception would be removed and allow the delayed payment through December 31, 2020.
5. For the portion of the loan that is not forgiven, which I do not see being a problem for most after the above changes, the loan repayment terms will extend from the current 2 year period to a minimum of 5 years.
Track the Bill here, but keep in mind that it usually takes 24 hours for the status to be updated HR 7010 Bill – Link to BIll>
Once this passes, I will put together a more complete rundown and post it to our blog at blog.paymaster.com.
Romeo Chicco
PayMaster, Inc
888-717-5577
