The widespread effects of COVID-19 continue to impact the U.S. economy. You may have heard that the deadline to apply for the Paycheck Protection Program (PPP) was extended until August 8, 2020. If you are still in need of funds, and have not applied, I encourage you to do so.
Also, last month, to provide still-needed support to businesses, the federal government passed an important amendment to the PPP.
The original program has already provided more than $514 billion in assistance to almost 5 million businesses. But the provisions to borrowers were exacting. The new Paycheck Protection Program Flexibility Act of 2020 provides greater flexibility for borrowers concerning how and when funds are spent while still allowing for the possibility of forgiveness. Here are the most impactful changes:
- Extends loan maturity date. Borrowers of loans approved on or after June 5, 2020, now have five years to repay the non-forgiven portion of loans.
- Extends forgivable expenses period. Borrowers now have 24 weeks from the date they received their loan, or December 31, 2020, whichever comes first, to qualify for loan forgiveness.
- Reduces payroll costs allocation. The original PPP mandated 75% of the loan be allocated for payroll costs to qualify for forgiveness. Through the Flexibility Act, the percentage dropped to 60.
- Extends the FTE salary/hourly wage re-hire safe harbors. Borrowers’ deadline to return to their pre-COVID full-time equivalent (FTE) staffing numbers and salaries was extended to December 31, 2020. The Flexibility Act also created a new FTE Reduction Exemption, which specifies loan forgiveness will not be impacted if the business was unable to re-hire or replace employees or return to pre-COVID-19 business activity due to compliance with regulatory requirements.
Businesses have a lot to consider regarding the Paycheck Protection Program Flexibility Act of 2020. The original program was riddled with confusion, due in part to additional regulations.
Boris Benic and Associates continues to closely monitor information being guidelines coming from the SBA and the U.S. Treasury. Let’s keep in touch so I can help you during this unique time.