Forgiveness & PPP Flexibility Act

Update June 3, 2020: The Senate just passed the PPP Flexibility Act and it's set to be signed shortly. Big, positive implications for small businesses. See below for key changes.

The troubled PPP is once again in flux, with some good news and some bad. First with the good. On Wednesday, the House overwhelmingly passed the Paycheck Protection Program Flexibility Act, which attempts to resolve many of the shortsighted provisions of the original program. It looks likely to pass the Senate and be signed as soon as next week. Some of the key changes include:

  • Adjusts the minimum of the loan to be spent on payroll from 75% to 60%
  • Extend the window businesses have to use the funds from eight weeks to 24 weeks
  • Extends the rehiring deadline from June 30 to December 31, 2020
  • Gives more flexibility for businesses who couldn't rehire workers or due to safety restrictions
  • Extends the repayment term
  • Allows businesses that get loan forgiveness to continue deferring payroll taxes

Funding from the PPP is still available, and — given the likelihood of the "Flexibility Act" getting passed — any businesses who have been holding out on applying for a PPP loan due to the onerous terms should reconsider.

Businesses who have been holding out on applying for a PPP loan due to the onerous terms should reconsider

But this good news comes after two consecutive weeks of frustrating news. First, the Treasury released its complex forgiveness application form which will be intimidating for small businesses absent an accountant and lawyer. And then came holiday release of the Treasury's “Interim Final Rules” on PPP loans, which make this already messy program more restrictive and complex. Among the changes include putting the onus on the small businesses to be responsible for the forgiveness calculation and documentation. Also, owners and the self-employed will find their portion of payroll forgiveness arbitrarily capped at $15,385. More details on the changes can be found in this great overview.

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The information contained in this post is intended for informational purposes only and does not constitute legal advice or opinion, nor is it a substitute for the professional judgment of an attorney.