“If you fail to prepare, you’re prepared to fail.” – Olympian Mark Spitz
In March 2020, under the Coronavirus Aid, Relief and Economic Security (“CARES”) Act, Congress allocated $349 billion dollars in funds to the Paycheck Protection Program (“PPP”) to help small businesses and nonprofits hurt by the Coronavirus crisis to keep workers on their payrolls. In the second round, Congress added $310 billion to the fund.
Paycheck Protection Program Flexibility Act (“PPPFA”)
On May 28th, 2020, the U.S. House of Representatives passed a bi-partisan bill called the Paycheck Protection Program Flexibility Act (“PPPFA”) to modify certain provisions of the PPP employers must follow to be eligible for loan forgiveness. The bill passed by a 417-1 vote. The U. S. Senate passed the bill on June 3rd. Today, President Trump signed the bill into law.
One issue raised in the Senate prior to the vote was whether the new bill allowed companies to apply for PPP loans as late as December 31st. The CARES’ Act cutoff for seeking a PPP loan is June 30th. On June 3rd, a letter was published in the Congressional Record advising that the extensions cited in the PPPFA does not provide additional authority to the Small Business Association to accept applications for PPP loans after June 30th, 2020.
- Under the PPPFA, employers can spend 60 percent—rather than the former 75 percent of PPP proceeds on payroll costs. The additional 40 percent can be spent on mortgage interest, rent, utilities and other costs as opposed to the 25 percent cited in the CARES Act.
- Employers will have up to 24 weeks—instead of 8 weeks –to spend the loan proceeds. (Employers still have the option to choose to use the 8 week plan under the PPPFA). Further, employers can defer payroll taxes even if they receive loan forgiveness. Under the CARES Act, employers must rehire certain laid-off workers by June 30th to seek loan forgiveness, but the PPPFA extends the deadline to December 31st with some exceptions based on employee availability.
- Extends the two-year term for loans to five years.