President Trump has signed the Paycheck Protection Flexibility Act into law, extending the amount of time Paycheck Protection Program (PPP) loan recipients have to spend their funds from eight weeks to 24 weeks. It also lowers the portion of funds borrowers must spend on payroll costs to 60 percent, down from 75 percent in order to qualify for forgiveness of the full PPP loan amount.
If your small business won some of the billions of dollars in Paycheck Protection Program (PPP) loans, you now have longer to spend the money. It’s also easier to convert that loan into a grant so you won’t have to repay it.
This smooths the path for small-business owners to qualify for loan forgiveness. The House of Representatives last month approved the legislation after business owners complained about spending requirements forcing businesses to use 75% of the loan on payroll. The Senate approved the measure by unanimous voice vote last this week.
The loans, part of the Coronavirus Aid, Relief, and Economic Security Act (CARES), are meant to help owners cover payroll costs, rent and utilities.
Here are six ways the law attempts to make using PPP loans easier:
You now have 24 weeks to spend your funds, up from eight weeks .
You need to spend 60% of the loan on payroll, down from 75%.
The covered period of the loan now ends Dec. 31 instead of June 30.
You won’t have to make employer payroll tax payments through the end of 2020.
Your business will not lose any loan forgiveness eligibility if you can show that some employees declined to return to their jobs or the pre-pandemic headcount is no longer required.
The payback period for new loan applicants has been extended from two years to a minimum of five for those not seeking or who are ineligible for forgiveness.