You’re used to it by now—again the rules are changing. Here’s one that definitely works in your favor.
After rare and unanimous consent in both the House and the Senate for a bill to loosen PPP restrictions, President Trump signed into law the Paycheck Protection Program Flexibility Act (PPFA) on June 5, 2020. You’ll definitely reap the benefit of this one.
- More flexibility on how you use the loan—Now only 60% of PPP funds must be used for payroll, down from the earlier requirement of 75%. That means up to 40% of your loan can be used for other qualifying expenses (still must be rent, mortgage payments, utilities, or interest on loans).
- Deadline extended to use PPP—You now have until the end of the year to use your PPP, specifically, 24 weeks from the date the funds were received. This is up from the original 8-week requirement.
- Deadline for rehiring extended through 12/31/2020—This was pushed back from the original June 30th deadline. All the calculation formulas recently published in the SBA’s forgiveness application still apply as is.
- Loosening of restrictions on returning to prior FTE headcount—You are now eligible for forgiveness even if you: 1) were unable to hire back the same employees you had on or before February 20, 2020, 2) were unable to hire similar replacement employees, or 3) can demonstrate that your business has been unable to return to the same level of activity that you had on or before February 20, 2020.
- Repayment Term Extended—If some of your PPP loans are not forgiven, you now have up to 5 years to repay at 1% interest. Plus, your first payment won’t be due until after both your bank and the SBA evaluates your forgiveness application. That process is expected to take up to 5 months, giving you even longer before you have to begin repayment.
More info will undoubtedly be coming down from on high about how the SBA will define #3 on the headcount issue—for now document, document, document.
And, because responsibility to prove your position on all elements of the PPP, still resides with you, again we say document, document, document. This is especially the case for loans over $2 million where the SBA may question whether you had other avenues of liquidity available to you before applying for PPP.
With more time to utilize the funds and greater flexibility overall, this is a big win for small business owners who will be much better positioned to receive 100% forgiveness.