Ron Buck
While many have been appreciative of the PPP, some businesses are struggling with some of the forgiveness requirements. The PPP Flexibility Act (HR 7010 — Amendment to CARES and PPP SIGNED 060520) signed into law on Friday resolves some of those issues as summarized below (summary courtesy of Zach Nichols at First Citizens). The forgiveness application that was previously published will also be revised.
Key changes:
- Extend the “covered period” under which small businesses can spend the loan proceeds from eight weeks to 24 weeks, or until Dec. 31.
- 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. That 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.
- 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.
