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Congress Approves Significant Paycheck Protection Program Loan Flexibility

Posted by Concannon Miller on Thu, Jun 4, 2020

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Congress Approves Significant Paycheck Protection Program Loan FlexibilityThere's very welcome news for businesses with Paycheck Protection Program (PPP) loans.

Following on the heels of the House last week, the U.S. Senate on Wednesday passed a plan allowing companies more flexibility on spending their PPP loans.

Highlights include:

  • Extends the time period to use the loan from 8 to 24 weeks.
  • Reduces the share of loan proceeds businesses are required to spend on payroll related expenses from 75% to 60%.
  • Extends the deadline to rehire workers from June 30 to Dec. 31.
  • Lengthens the loan term from two to five years.
  • Allows companies that receive loan forgiveness to defer payroll taxes. Get details on how to defer the taxes in our previous article.

This is all good news for companies with PPP loans and may entice other companies to reconsider the loans considering the increased flexibility. 

Here are some more details from the new PPP bill that are important for some borrowers to know:

  • Resource Center - Email Graphic Rev2Borrowers who don’t spend at least 60% of the proceeds on payroll costs are ineligible for forgiveness.
  • With regard to the new 24-week loan period, the extension is the earlier of 24 weeks or Dec. 31, 2020, so new borrowers may not get the full 24 weeks
  • Borrowers won’t lose forgiveness based on full-time equivalent (FTE) levels if they can prove:
    • There was an inability to rehire individuals who were employees on Feb. 15.
    • There was an inability to hire similarly qualified employees for unfilled positions on or before Dec. 31, 2020, or
    • There was an inability to return to the same level of business activity as such business was operating at before Feb. 15 due to compliance with requirements established by federal government during the period beginning on March 21, 2020, and ending Dec. 31, 2020, related to the maintenance of standards for sanitation, social distancing, or any other worker or customer safety requirement related to COVID– 19.
  • The extension of the repayment term from 2 years to 5 years only applies to loans made after the enactment of the new law. However, prior borrowers may renegotiate existing loan terms to match the new law if interested.
  • Loan payments do not begin coming due until the date the bank receives the forgiveness amount from the SBA.
  • To avoid having borrowers defer repayment by waiting longer to apply for forgiveness, the new law provides that if the borrower does not apply for forgiveness within 10 months after the last day of the covered period, payments will become due 10 months after the end of the PPP covered period.

If you need help during these challenging times, or recognize that you are not receiving the guidance you need for your business, please contact us for a discussion.

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Topics: Business consulting, COVID-19

Concannon Miller’s unique, holistic and intimate approach to financial health sets us apart from smaller CPA firms with more limited resources as well as mega firms where mid-sized clients struggle for attention. Contact us here to talk about improving your business.

This communication is designed to provide accurate and authoritative information in regard to the subject matter covered at the time it was published. However, the general information herein is not intended to be nor should it be treated as tax, legal, or accounting advice. Additional issues could exist that would affect the tax treatment of a specific transaction and, therefore, taxpayers should seek advice from an independent tax advisor based on their particular circumstances before acting on any information presented. This information is not intended to be nor can it be used by any taxpayer for the purposes of avoiding tax penalties.

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