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Favorable Changes May Be in Store for Obtaining PPP Loan Forgiveness

Ed McLeod

May 29, 2020

The U.S. House overwhelmingly (417-1) approved legislation Thursday, May 28th, making it easier for small businesses and other recipients of Paycheck Protection Program (PPP) funding to qualify for forgiveness of the loans.

The House bill, called the Paycheck Protection Program Flexibility Act (PPPFA), H.R. 7010, includes:

  • Extends the 8 week period in which borrowers must spend their PPP loan funds in order to be considered in the loan forgiveness computation to 24 weeks for most borrowers.
  • Extends application deadline from June 30 until Dec. 31.
  • Changes the loan proceeds use formula of 75 percent payroll/25 percent rent and utilities rule to 60 percent payroll/40 percent rent and utilities allowing greater flexibility in using funds and qualifying for forgiveness.
  • Allows borrowers that receive loan forgiveness to potentially defer payroll taxes.
  • Loosens up the requirement that borrowers must rehire employees by June 30, 2020, and potentially extends the deadline to December 31, 2020.
  • Increases the deferral period for repayments of portion not forgiven from six months to ten months.
  • Extends the two-year repayment requirement for loan proceeds not forgiven to a minimum of five years.

As of 5 p.m. ET on Wednesday, May 27th, the SBA had approved nearly 4.5 million PPP loans totaling more than $510.5 billion. More than $135 billion in PPP funds remained available for additional lending as of Wednesday.

The bill still needs to be approved in the Senate, where the specifics may change, and then signed into law by the President. The bill will likely not be finalized until sometime next week and it remains to be seen what final form the legislation will take.

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 feel free to contact us.

 

 

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