UPDATE: Paycheck Protection Program (PPP) Flexibility Act of 2020
The Paycheck Protection Program (PPP) Flexibility Act of 2020 signed earlier this month by President Trump amends the Paycheck Protection Program (PPP) to give borrowers more freedom in how and when loan funds are spent while retaining the possibility of full forgiveness. Its goal is to address some of the more challenging requirements when applying the Payroll Protection Program to actual business situations.
Key Points of this new bill Include:
- The PPP Flexibility Actamends the Paycheck Protection Program to give borrowers more time to spend loan funds and still obtain forgiveness.
- Borrowers now have 24 weeksto spend loan proceeds, up from eight weeks – but not beyond the new deadline: December 31, 2020.
- The PPP Flexibility Act also reduces mandatory payroll spending from 75% to 60%, with up to 40% of the loan used for mortgage interest, rent, or utility payments to obtain full loan forgiveness of that amount.
- Two new exceptionslet borrowers obtain full forgiveness even without fully restoring their workforce.
- Time to pay off the loan has been extended to five yearsfrom the original two years while retaining the 1% interest rate.
- The payment deferment period (principal, interest, fees) is now extended from six months after the end of the covered period to the date the SBA sends the borrower’s loan forgiveness amount to the lender.
- The PPP Flexibility Act now let’s businesses delay paying payroll taxeseven if they took a PPP loan, not allowed under the original CARES Act.
The new PPP Flexibility Act of 2020 has already received positive response from financial experts mostly for the extended spending deadline and retooled payroll costs guidance. Please review this document for more information.