• AnaM


The Senate passed legislation Wednesday night that will ease restrictions on how businesses spend their Paycheck Protection Program (PPP) loans, potentially giving small-business owners a better shot at qualifying for loan forgiveness. The bill, called the Paycheck Protection Flexibility Act, gives businesses more time to spend the loan proceeds and relaxes rules for how the money must be spent. 

The bill would make a handful of changes to the program, which offers companies forgivable loans that act like grants as long as the money is used mostly to pay employees.

The bill now awaits President Trump’s signature.

Highlights of the bill include:

  • Lengthening the term to spend PPP funds from eight weeks to 24 weeks: The bill would extend an eight-week period -- when proceeds must be spent for loans to be forgiven -- to 24 weeks or until the end of the year, whichever comes first.

  • Extending the covered period for the loan from ending on June 30 to Dec. 31.

  • Lowering the amount of PPP funds that must be spent on payroll from 75% to 60%: The measure would lower a Small Business Administration threshold requiring businesses to spend 75 percent of their funds on payroll to 60 percent. But the legislation as written would require companies to spend 60 percent on payroll or none of the loan would be forgiven.

The current PPP program allows partial loan forgiveness if a company uses less than 75% of a loan for payroll, but the House bill appears to state that none of the loan would be forgiven if the 60% threshold isn’t met.

  • Authorizing a delay of employer payroll tax payments through the end of 2020. If you decided to defer payroll taxes you still qualify for loan forgiveness.

  • Waiving any reduction in loan forgiveness if a company can show that some employees declined to return to their jobs or the pre-pandemic headcount is no longer required.

  • Extending the payback period from two years to five for those not seeking or who are ineligible for forgiveness.

The bill would not add funds to the program, which has issued $510.3 billion in loans so far out of the $660 billion available. The lending pace has slowed considerably in the last few weeks, and the approved total has fallen from $513 billion in mid-May as some companies have returned loans.

How This Affects Small-Business Owners

Staying up to date on the latest rules has been dizzying, with multiple amendments and clarifications to the original PPP rules released since the program’s inception.

There’s also no single clearinghouse containing all of the most-up-to-date information, which further hampers owners’ ability to understand the changes. Most of the details can be found by combing through a combination of the latest legislation and via the FAQ page on the website of the Small Business Association, which administers the program.

For those who use payroll companies, filing for forgiveness may be a bit easier, as those companies can provide the highly detailed documentation and information required for a PPP loan to turn into a grant. But those who do their own bookkeeping may find it challenging to get all the details right.

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