On June 3, 2020, US Senate unanimously passed the Paycheck Protection Flexibility Act of 2020, by adopting the House version of the legislation. President Trump is expected to sign it. The act triples the time allotted to small businesses (i.e. PPP loan recipients) to spend the funds and still qualify for forgiveness of the loans provided under CARES Act.
Below are the key provision of the bill:
- The Act provides the recipients of the loan with the option to extend the initial eight week period for using the loan proceeds to twenty-four weeks. In other words, the PPP recipients can either use the new extended covered period of twenty-four weeks or keep their original eight week covered period. It should be noted that in no case the covered period can be extended beyond December 31, 2020.
- The Act drops the payroll expenditure requirement from 75% to 60% but it is now a cliff, meaning that the recipients that do not have covered payroll costs totaling at least 60% of the loan amount will not be eligible for any forgiveness.
- Under this Act, Recipients have until December 31, 2020 (extended from June 30, 2020) to restore their workforce levels and wages to the pre-pandemic levels in order to qualify for full forgiveness.
- If a portion of the loan is not forgiven, recipients may have five years to repay the loan at 1% interest rate instead of two years under previous legislation.
For many small businesses, the major takeaway from the Paycheck Protection Flexibility Act of 2020 is that their eligible payroll costs during the covered period will now exceed the loan amount, and the entire loan can be forgiven without having to consider other eligible expenses. Another practical takeaway is that recipients will have an additional sixteen weeks before they begin the loan forgiveness application process.
It is possible that congress will revise this act to clear up some technicalities.
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