PPP Flexibility Act Passes Congress

Updated: Aug 14, 2020

This is going to all clients who we know have taken Paycheck Protection Program ("PPP") loans, or who have been considering them. There's a new development emerging from Congress -- the Paycheck Protection Program Flexibility Act was passed by the House and Senate, and is currently waiting for the President's signature. This bipartisan, nearly unanimous legislation makes a few key changes to the PPP, namely:

  • The 8-week "covered period" is extended to 24 weeks (but no later than December 31). This means that all expenses (payroll, rent, utilities, etc.) incurred during the new 24 week period starting on the loan origination date will be eligible for forgiveness. For most businesses, this means that they will not have to worry about incurring enough payroll, rent, and utility costs to have the full amount of their loan forgiven.

  • Conforming changes to several other rules were made, including extending the deadline to re-hire your employees (to avoid the FTE reduction to the forgiveness amount) from June 30 to December 31 and changing the interest and payment deferrals to align with the new forgiveness periods.

  • The ratio of payroll to non-payroll costs was revised: now only 60% of the forgiveness amount must be used for payroll, the remaining 40% can be used for allowable non-payroll costs (rent, utilities, interest payments on office space, etc.). There's a caveat though: per our reading of the bill, it requires that at least 60% of the PPP loan amount must be used on payroll -- i.e. if you only spend 59% of the funds, but spend it all on payroll, you would not be eligible for any forgiveness. We don't anticipate that this scenario applies to many companies, but if you think it might apply to you, we're happy to discuss.

We expect more from the SBA and Treasury in the coming weeks, but as soon as this is signed by the President, this becomes law -- which is why we wanted to get this update out to you as soon as possible so you can figure this in when considering your PPP forgiveness strategy. If you'd like to discuss how this applies to you specifically, or if we've been working with you on a strategy, how it might change those considerations, please let us know.

Thank you! -Adam

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