Yesterday evening the Senate voted to pass the Paycheck Program Flexibility Act of 2020, which will ease some of the restrictions surrounding the PPP loans to small business owners. This legislation is intended to assist small businesses throughout the country, who are currently struggling to bring back their workforce in a timely fashion and maximize their loan forgiveness.
The approved bill will ease some of those restrictions by implementing the following changes:
- Reducing the payroll allocation for borrowed funds from 75% to 60%, however, borrowers must spend at least 60% of the loan on payroll or none of the amount will be forgiven
- Borrowers can choose to extend the original “spend” period from 8-weeks to 24 weeks (which would extend the rehire deadline from June 30 to December 31st for employees) or they can choose to keep the original 8-week provision
- Several new exceptions have been added allowing borrowers to achieve full PPP forgiveness, even if the full workforce is not restored:
- Further flexibility if the borrower could not find “qualified employees”
- Further flexibility to restore business operations to February 15, 2020 levels due to COVID-19 related operating restrictions
- The repayment period has been extended to 5 years instead of the original 2 years. The interest rate remains at 1%
- Allowance for payroll tax deferral for two years with 50% of the tax due in 2021 and the balance due in 2022*
The bill still needs to be signed by the President, which is expected to be done at any time.
We will continue to monitor this closely and pass along any additional information with regards to procedures and logistics, as we receive it.
* Payroll Tax Deferral
Employers can defer the employer’s portion of Social Security payroll taxes (6.2%) with respect to wages paid before January 1, 2021. 50% of an employer’s Social Security payroll taxes would not be due until December 31, 2021 with the remaining 50% deferred until December 31, 2022.
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