Senate Passes PPP Fix
As many Paycheck Protection Program ("PPP") loan recipients are nearing the end of their 8-week spending period in order to qualify for maximum forgiveness, a bill that will allow more flexibility in using the PPP loan funds passed the Senate on June 3rd. The bill, which already passed the House last week will now go to President Trump to sign.
The PPP provides forgivable loans to help small businesses make their payrolls during the Covid-19 crisis. The bill extends the 8-week spending period to 24 weeks or until the end of the year, whichever comes first. This extension allows business that have just been able to re-open due to governmental restrictions to be able to have more time to use the funds and still qualify for forgiveness.
The bill also lowers the threshold for the amount of loan money required to be spent on payroll from 75% to 60%. The current PPP program allows partial loan forgiveness if a small business uses less than 75% of a loan for payroll, but the new bill appears to state that none of the loan would be forgiven if the 60% threshold isn't met. This uncertainty in the language in the new bill regarding partial loan forgiveness for recipients spending less than 60% on payroll may change in the near future.
Recipients would also have as long as five years, instead of original two years, to repay any money owed on an unforgiven loan.
Approximately $130 billion of PPP funds remain available and new applications are expected to be received. As a reminder, small businesses are only allowed to receive a PPP loan once.