PPP, Now More Flexible than Before
The fallout from the COVID-19 pandemic has not stopped. Nor, fortunately, have financial programs to help businesses across the country.
The original Paycheck Protection Program loan legislation passed in March 2020 has now been supplemented by the Paycheck Protection Program Flexibility Act (PPPFA), signed into law on June 5, 2020.
Here are notable features of the PPPFA:
The period for spending loan funds on covered expenses has been increased from eight to 24 weeks. Loan recipients under the original PPP Act can choose to use either time period. Load recipients under the new act (i.e. those approved from June 5 onward) can only use the 24-week period. The payroll expense required to maximize loan forgiveness has been reduced from 75% to 60%. The deadline for rehiring staff to qualify for forgiveness has moved from June 30, 2020 to December 31, 2020.
The date by which the same number of full-time equivalent (FTE) employees must be rehired has moved from June 30, 2020 to December 31, 2020. A business can spread hires and number of hours per employee over time as long as the FTE count is at the right level by the end of the year. The repayment term of the loan has increased from two to five years, but only for loans received after June 5. The term for loans received under the original PPP Act is still two years. The 1% interest rate remains.
Also of note:
Expenses forgiven under the PPP are still not tax deductible. Calculation of the forgiveness amount for businesses making $100,000 or more annually has not changed. Therefore, the maximum compensation eligible for forgiveness remains $15,385 in spite of the time extension. There are some conditions that allow a business to be granted an exception to the FTE requirement. Your accountant can go over these with you. Because financial relief programs related to COVID may continue to evolve, it is a good idea to stay in touch with your accountant and also check the Small Business Administration website periodically so that you can stay up to date on program status.
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