Great News! New PPP Flexibility Rules!

It’s official! The President has signed into law new rules to govern the PPP (Paycheck Protection Program), making it much more flexible, much more ‘do-able’ to spend the funds in a way that makes sense for your business and more easily meet terms of loan forgiveness.

Interestingly and surprisingly, there are approximately 100 billion dollars remaining to be lent, so this may be relevant to you even if you had decided not to apply before.

PPP Flexibility Bill

These are the important changes:

  • More Time to Spend Your Loan Funds. You no longer have only 8 weeks to spend disbursed PPP funds! You have 24 weeks or through December 31, 2020, whichever is soonest, as long as your lender agrees. Check with your lender ASAP! (They have the choice, for those whose PPP loan funds were received before this amendment was enacted.) It is expected that the SBA may communicate a higher per-employee cap.
  • A Lower Percentage to Meet for Payroll Expenses. Though you can spend a higher proportion on payroll-related costs, the minimum has been lowered to 60%. This allows you more to spend on mortgage interest, rent and utilities and takes away some of the pressure to stretch to meet the 75 percent requirement.
  • Reduced headcount does not necessarily impact loan forgiveness. There are two major exceptions to help you if you have not been able to restore headcount as hoped:
    • FTE (full-time equivalent) headcount reduced and not restored between February 15, 2020 and December 31, 2020 will not impact loan forgiveness if your business is able to, in good faith, document: 1) your inability to rehire individuals who were employed on February 15, 2020; and 2) your inability to hire similarly qualified employees for unfilled positions on or before December 31, 2020.
    • FTE (full-time equivalent) headcount reduced and not restored between February 15, 2020 and December 31, 2020 will also not impact loan forgiveness if your business is  able to, in good faith, document: your inability to return to the same level of business activity as such business was operating at or before February 15, 2020, due to compliance with requirements established or guidance issued by the Secretary of Health and Human Services, the Director of the Centers for Disease Control and Prevention, or the Occupational Safety and Health Administration between March 1, 2020 and December 31, 2020, related to the maintenance of standards for sanitation, social distancing, or any other worker or customer safety requirement related to COVID–19.
  • Extension of Safe Harbor Date.  As alluded-to above, you have until December 31, 2020 instead of June 30, 2020, to restore headcount (if you can’t see above). So, you have more time to bring back your furloughed employees.
  • Extension of Maturity Date. You may be granted up to 5 years by your lender to pay back the funds.
  • Payroll Tax Deferral Still Permitted after loan forgiveness determination. The amendment allows you to take advantage of Section 2302 of the CARES Act, allowing you to delay the payment of payroll taxes, until December 31, 2020 instead of through the date of your loan forgiveness determination.