The U.S. Senate on Wednesday passed a House bill to revamp the Paycheck Protection Program (PPP), giving a boost to small businesses and organizations trying to stay afloat during the coronavirus pandemic and resulting economic turmoil.
The PPP allows businesses to apply for forgivable emergency loans, but its rollout wasn’t smooth, with funding needing to be replenished, delays in approvals and many owners raising complaints about the program’s flexibility. The changes within the bipartisan Paycheck Protection Flexibility Act, set to be enacted with the president’s signature, should make it easier for more businesses to qualify for 100% forgiveness of the loan.
Among the changes:
- The amount of time to spend the loan is 24 weeks (increased from eight weeks). Borrowers can keep to the eight-week period if they prefer.
- The percentage of the loan recipients must spend on payroll is at least 60% (decreased from 75%), with the rest eligible for non-payroll expenses, such as rent, utilities and mortgage interest.
- The opportunity to avoid FTE Reduction penalties is extended six months to December 31, 2020.
- Loan terms can be extended from two years to five years.
- Businesses can delay payment of their payroll taxes.
For companies that were at the end of their eight-week period and were preparing to apply for forgiveness, these changes can affect their previous calculations, and new application forms for forgiveness are expected.