As we reported in our previous alert, the bipartisan bill the Paycheck Protection Program Flexibility Act of 2020, was passed on May 28, 2020 by the House of Representatives. Last night, the Senate passed the bill, which now heads to President Trump for his signature. If signed into law by the President, the bill will make significant changes to SBA’s Paycheck Protection Program, including:
- Extend the “covered period” under which small businesses can spend the loan proceeds from eight weeks to 24 weeks or until December 31, 2020.
- Remove the limits on loan forgiveness for small businesses that were unable to rehire employees, hire new employees, or return to the same level of business activity as before the virus.
- Expand the 25% cap to use PPP funds on nonpayroll expenses, such as rent, mortgage interest, and utilities, to 40% of the total loan, which lowers the 75% requirement for payroll expenses to 60% to get maximum forgiveness.
- Allow small businesses to take a PPP loan and also qualify for a separate, recently enacted tax credit to defer payroll taxes, currently prohibited to prevent “double dipping.”
- Extend the loan terms for any unforgiven portions that need to be repaid from two years to five years, at 1% interest.
- Give small businesses more time to rehire employees or to obtain forgiveness for the loan if social-distancing guidelines and health-related actions from the Centers for Disease Control and Prevention or other agencies prevented the business from operating at the same capacity as it had before March 1, 2020.
- Extend the period for when a business can apply for loan forgiveness, from within six months to within 10 months of the last day of the covered period, before it must start making interest and principal payments. Under the new bill, PPP loan interest and payment of principal and fees will be deferred until the loan is forgiven by the lender.
PilieroMazza is monitoring the rapidly changing COVID-19 crisis and will provide updates when more guidance is released by the government. We also invite you to visit the Firm’s COVID-19 Client Resource Center to access resources that will help businesses navigate the effects of the COVID-19 pandemic. If you need immediate assistance, please contact us at [email protected].