The Paycheck Protection Program Flexibility Act of 2020 (PPPFA) was signed into law last Friday afternoon. This act changes several aspects of the original PPP loan and its forgiveness aspect:
- The amount of loan required to be used for payroll has changed from 75% to 60%, thus increasing other eligible expenses rate up to 40%.
- The covered period will be extended from 8 weeks to 24 weeks or December 31, 2020, whichever is earlier. If you’ve already received a PPP loan, you can choose the 8-week OR the 24 week option. You do not have to wait the full 24 weeks to request forgiveness.
- Full time employee (FTE) exemptions (time to rehire employees) are available thru December 31 rather than June 30.
- A new exemption has been added for employers who are not able to return to the same level of business activity as prior to February 15 or rehire the same individuals. SBA will need to clarify this through additional guidance.
- The repayment term of the loan has increased from 2 to 5 years. The deferral period for interest on PPP loans is extended from six months to one year.
- Borrowers whose PPP loans are forgiven will be permitted to defer payroll tax under the CARES Act.
Additional guidance will need to be issued by the Treasury and SBA prior to preparing or submitting any documentation for PPP loan forgiveness. We do not know when a new PPP Loan Forgiveness application will become available but will continue to keep you updated on the status of this continually changing program.
If you are nearing the end of your 8 week period, even if you feel you have reached full forgiveness qualification, we suggest to delay preparing and/or submitting the application for forgiveness until additional guidelines are issued. There may be additional changes as the guidelines roll out that could be beneficial. For example, many banks are requesting a change that would allow owners to certify for full forgiveness for loans under a certain amount without forgiveness application submission.
If you would like to engage with BeanLab to assist in acquiring a PPP loan (currently only available until 6/30) or PPP loan forgiveness analysis and/or completing the application (once available), please contact us as soon as possible beanlabteam@beanlab.com.
