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Welcome Changes Coming to Forgiveness of PPP Loans

Andy Baumruk

June 5, 2020

The U.S. Senate passes unanimously approved House Bill H.R. 7010 (with no variations) on Wednesday, June 4th, tripling the time for small businesses and other PPP loan recipients to spend their funds and still qualify for loan forgiveness.

Leaders from both parties in the Senate passed the legislation as the clock on the initial eight-week window was nearly expired for the first recipients of PPP loans.

This bill, called the Paycheck Protection Program Flexibility Act (PPPFA), includes:

  • Borrowers can choose to extends 8 week period to 24 weeks or keep the 8 week period, making it easier to qualify for full forgiveness.
  • The 75%/25% payroll cost/rent and utilities phase out rule changes to a 60%/40% all or nothing rule. Borrowers must at least spend 60% on payroll costs or none of the loan will be forgiven.
  • Borrowers must restore their workforce levels and wages to the pre-pandemic levels by Dec. 31, a change from the previous deadline of June 30. If the workforce is not restored, only partial forgiveness will be available.
  • 2 new exemptions allowing borrowers to achieve full PPP Loan Forgiveness if they do not fully restore loan forgiveness:
    1. Borrowers tried to rehire but really couldn't find qualified employees.
    2. Borrowers were unable to restore business operations because of COVID-19 related operating restrictions.
  • Borrowers now have 5 years to repay the loan instead of 2 years and the interest rate remains at 1%. Repayments do not start until 10 months from receipt of loan, rather than 6 months.
  • Businesses with a PPP loan can delay their payroll taxes which was prohibited under the CARES ACT. 

The bill is not yet law but is expected to be signed into law by the President.

 The deadline to apply for a PPP loan remains June 30, 2020.

We will continue to monitor the legislation as it makes its way through Congress and provide updates as the final bill is signed into law. If you would like more information on the Paycheck Protection Loan or the loan forgiveness programs, please contact us.

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