On Wednesday, June 3, the United States Senate approved major changes to the Small Business Administration’s Paycheck Protection Program (PPP), making several of the program’s key terms more favorable to businesses in North Carolina and across the country.
The bill, entitled the Paycheck Protection Program Flexibility Act, was passed by the House of Representatives on May 28, and is now headed to the President’s desk for signature.
What Will The New Law Do?
Once signed into law, which is fully expected, the PPP Flexibility Act, will:
- Grant businesses flexibility in the loan amount used for payroll and other expenses. Currently, to be fully forgiven, seventy-five percent (75%) of a PPP loan must be used for payroll. The new law changes the amount required to be spent on payroll to a more modest sixty percent (60%), granting business owners the flexibility to apply more of their total loan proceeds to non-payroll qualified expenses needed to keep their business operating (rent, mortgage interest and utilities).
- Allow for loan forgiveness beyond the eight-week covered period. Currently, to be forgiven, PPP loan proceeds must be used for expenses in an eight-week period, starting when the PPP is funded. The new law provides for a “Borrower’s Choice” provision, which allows those who received PPP loans prior to enactment to choose a covered period of either 8 weeks from origination or 24 weeks from origination.
- Give businesses more time to rehire workers. The change discussed above makes loan forgiveness easier for recovering businesses to achieve by extending the PPP’s rehiring deadline to 24 weeks or December 31, whichever comes first.
- Extend the loan payback timetable. For any loans not forgiven, or any portion thereof, the new law extends the current two-year payback timeline to five years, still at one percent (1%) interest.
- Defer payroll taxes for businesses who receive PPP loans. Currently, businesses who took a PPP loan are prohibited from also qualifying for a separate, recently enacted tax credit to defer payroll taxes. The new law removes that prohibition, helping owners keep needed revenue within the businesses themselves.
If you have questions about how the PPP Flexibility Act impacts you or your business, please contact Ritchie Taylor or your Manning Fulton relationship attorney.