Late Wednesday evening, the Senate passed the House version of the Paycheck Protection Program Flexibility Act which send the bill to the President for signature.
As many of you may know, the either-week clock has already or is very close to expiring for initial recipients of PPP funds. This prompted leaders from both sides of the aisle in the Senate to pass the legislation to provide some relief to those looking to start their forgiveness applications in the coming days and weeks.
Some of the main points of the bill are as follows:
Current borrowers can elect to extend the original eight-week period to 24 weeks OR you can keep your terms at eight weeks. New borrowers will automatically have up to 24 weeks or until December 31, 2020, whichever comes first. This should help more borrowers to reach full or nearly full forgiveness.
The expenditure amount has been reduced from 75% to 60%. The original legislation required that at least 75% was spent on payroll expenses which caused an issue with borrowers needing funds to pay other expenses to keep their doors open. The reduction to 60% comes with a catch. If a business fails to use at least 60% of their funds on payroll expenses, then NONE of the loan will be forgiven.
Borrowers can now use the entire 24 week period (or before December 31) to restore their workforce levels and wage levels to pre-COVID levels that’s required in order to obtain forgiveness. The previous deadline was June 30.
The repayment term has changed from two years up to five. The interest rate remains unchanged at 1%.
Previously, businesses that took PPP funds were not able to delay the payment of payroll taxes. The new legislation removes that restriction.
If you waited to apply and you thought the funds were gone, never fear! There is still an estimated $120 billion left in the pot. Reach out to your banker or use a third party lender like Kabbage or even Paypal or Quickbooks to get your application prepared and sent off to the SBA. These funds could be the oomph your business needs to get through this difficult time.
If you have questions, comments, or concerns, don’t hesitate to reach out. Be sure to stay tuned for more updates!