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Changes to PPP Loan forgiveness coming

While it’s still awaiting the President’s signature, the Senate has unanimously passed a House bill proposing changes to PPP loan forgiveness, a welcome reprieve for small business owners still crippled by COVID-19 but worried about repayment.

Here are the highlights of the new legislation for those who applied for and received PPP Loans:

  • Current borrowers can choose to extend the eight-week period they have to use the funds in order to qualify for forgiveness to 24 weeks. They can also choose to keep the eight week period if they wish to.

  • New borrowers will have 24 weeks, but that timeline cannot extend beyond December 31 of this year. (June 30 is still the deadline for applying for a PPP loan and the program still has dollars available.)

  • The payroll expenditure requirement has dropped from 75% to 60%, but it’s a cliff. This means PPP loan borrowers must spend at least 60% of their loan on payroll or none of the loan will be forgiven. (Right now, borrowers are required to reduce the amount of the loan eligible for forgiveness if less than 75% is used for payroll costs, but forgiveness wasn’t eliminated if the threshold wasn’t met.)

  • PPP loan recipients can use the 24 weeks to restore workforce levels and wages to pre-pandemic levels required for full forgiveness, but must do so before Dec. 31, instead of June 30.

  • The new legislation also includes two new exceptions which allow borrowers to achieve full loan forgiveness even if they don’t fully restore their workforce. Previously, they were already allowed to exclude from their calculations employees who turned down good faith offers to be rehired at the same hours and wages as before the pandemic. Now, the new bill allows PPP recipients to adjust because they couldn’t find qualified employees or were unable to restore their business operations to Feb. 15 levels due to operation restrictions caused by COVID-19.

  • New borrowers have up to five years to repay a PPP loan. Current borrowers can be extended to five if they and the lender agree. Regardless, the interest rate is still 1%.

  • Last but not least, the bill allows businesses that received PPP loans to delay payment of payroll taxes, a move prohibited under the CARES Act.

Business clients interested in applying for a PPP Loan are welcome to contact us with questions and for help. There are still many millions of dollars available in the program that could be helpful to your business. If you received a loan and have questions about forgiveness and repayment, you’re welcome to contact us. The US Chamber of Commerce also issued this helpful guide, but remember that it was published prior to this new legislation and may have slightly dated information. We will post a link to a new document if it becomes available.

Again, this still won’t go into effect until it’s signed by the President, but that’s expected to happen shortly. We’ll keep you updated.

All information in this post was pulled from this article from the Journal of Accountancy.

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