Important Amendments to the Payroll Protection Program (PPP) Approved by US Senate
On June 3, 2020, the US Senate unanimously approved a previously-passed House of Representatives bill that amends key portions of the Small Business Administration’s (SBA) Payroll Protection Program (PPP). These amendments introduce significant changes to the program, aiming to provide greater flexibility and support for small businesses affected by the COVID-19 pandemic.
Key Amendments to the PPP or Payroll Protection Program:
1. Adjusted Payroll Cost Requirements:
- Percentage for Full Forgiveness: The amendment lowers the percentage of loan proceeds that must be spent on payroll costs from 75% to 60% for full loan forgiveness. This change allows businesses more flexibility in using PPP funds for other essential expenses, such as rent, utilities, and mortgage interest.
2. Extended Loan Term:
- Loan Repayment Period: The term of PPP loans has been extended from two years to five years for any new PPP loans made after the enactment of the bill. This extension provides businesses with additional time to repay any unforgiven portions of the loan, reducing financial pressure as they recover from the economic impact of the pandemic.
3. Modified Covered Period:
- Extension of Covered Period: The covered period during which businesses must use PPP funds to qualify for forgiveness has been extended from 8 weeks to 24 weeks. This extension gives businesses a longer timeframe to utilize the funds appropriately and meet the criteria for loan forgiveness.
Additional Changes and Details to Payroll Protection Program (PPP):
4. Payroll Tax Deferral:
- Deferral Eligibility: The amendments also allow businesses that take PPP loans to defer payroll taxes, which was previously restricted. This change provides additional cash flow relief to businesses by enabling them to postpone payroll tax payments.
5. Rehiring Deadline:
- Extended Deadline: The deadline for rehiring employees to qualify for loan forgiveness has been extended from June 30, 2020, to December 31, 2020. This extension accommodates businesses that may need more time to return to pre-pandemic staffing levels.
Impact on Small Businesses:
These amendments to the PPP are designed to provide greater flexibility and support to small businesses, helping them navigate the ongoing challenges of the COVID-19 pandemic. By adjusting the requirements for loan forgiveness, extending the loan term, and modifying the covered period, the new legislation aims to ensure that more businesses can fully benefit from the program and maintain their operations.
Next Steps for Businesses:
Businesses should review these amendments carefully to understand how they may affect their use of PPP funds and loan forgiveness eligibility. It is essential to keep accurate records of all expenses and to stay informed about any further changes or guidance from the SBA.
Assistance and Support:
For more detailed information on these important changes to the PPP and how they may impact your business, please refer to our latest Client Alert. At Gesmer Updegrove LLP, our team of experienced attorneys is available to provide guidance and support. Whether you need assistance understanding the new requirements, preparing documentation for loan forgiveness, or navigating the application process, we are here to help.
Contact Information:
At Gesmer Updegrove LLP, we are committed to supporting our clients through these challenging times and ensuring they can access the resources and information needed to sustain and grow their businesses. Please contact us for personalized advice and support.