Updated on 6/5/20: The Paycheck Protection Program Flexibility Act of 2020 was signed into law on June 5th, making the program's lending terms more favorable and practical to small businesses. The Act provides for, among other things:
- An extension in the timeframe in which the PPP funds could be spent from 8 weeks to 24 weeks, or December 31st;
- Expansion of the 25% cap on the use of PPP funds to cover nonpayroll expenses, such as mortgage payments, rent, etc. to 40%, bringing the 75% payroll expense requirement for forgiveness down to 60%; and
- The elimination of the limits on forgiveness for small businesses that are unable to hire back former employees, hire new employees or return to the same level of business activity as before the virus.
- Extension of loan terms for any unforgiven portions that need to be repaid from two years to five years, at 1% interest.
Small business are now able to take the PPP loan and also qualify for a separate, recently enacted tax credit to defer payroll taxes, which is currently prohibited to prevent “double dipping.”
This Act is a boon to small business owners and allows them to take advantage of PPP funds to help keep their businesses open. Under past law, many small business owners have been scrambling to spend the funds within the existing 8-week time period while also trying to keep mortgages or rent current.
Hurwitz & Fine will keep you informed as to the status of this important piece of legislation as it becomes available.