If you’re having trouble keeping up with the multiple updates to the Coronavirus Aid, Relief and Financial Security (CARES) Act, and the accompanying Paycheck Protection Program (PPP), you’re not alone.
This past Friday, June 5, Congress passed the Paycheck Protection Program Flexibility Act of 2020, designed to give borrowers more flexibility in how PPP funds may be spent without compromising the borrower’s eligibility for loan forgiveness. Let’s take a look at the highlights:
- The new bill changes the formula for forgiveness eligibility, reducing the portion of the loan that must be dedicated to payroll costs from 75% to 60% (conversely, the allowance for non-payroll costs increases from 25% to 40%).
- The original PPP stipulated that loan funds must be spent within eight weeks of loan origination. That’s now extended to 24 weeks.
- Borrowers may now defer payroll taxes without penalty and still remain eligible for loan forgiveness.
- The safe harbor for rehiring workers is extended as well, without affecting loan forgiveness. The original bill called for rehiring employees by June 30 to maintain eligibility for forgiveness. The new date is December 31.
- There are now loan forgiveness exemptions available for businesses that are unable to return to normal levels of operation due to COVID-19 restrictions, and for those unable to rehire an employee or replacement.
- The minimum loan repayment period for unforgiven loans is extended from two years to five years.
If you’re a borrower under the PPP, you should check in with your lender to confirm eligibility for forgiveness under the new rules.
Questions about the PPP or other financial issues impacting your business? Contact Consolidated Insurance.