PPP Loan Extension
After a unanimous vote on Wednesday June 3rd, the Senate approved legislation to give small businesses 24-weeks to use the Paycheck Protection Program Loan. The plan was created to help aid in the relief from the damage caused by the coronavirus pandemic, originally giving businesses just 8 weeks to use the loan with some limitations. The President signed this into law on Friday June 5th, the law will allow businesses to use the loan for other expenses other than payroll.
This Paycheck Protection Flexibility Act includes:
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Borrowers can choose to extend to the full 24-weeks, the extension cannot exceed December 31st 2020. This would hopefully allow borrowers to reach almost full or complete loan forgiveness.
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In order to qualify for full forgiveness borrowers must have reached their pre-pandemic level. Meaning they restored their workforce and wages by December 31st 2020. Prior the deadline was June 30th.
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The CARES Act stated that 75% of the loan had to be used for payroll purposes. This new Flexibility act has dropped it to 60% but the forgiveness is not completely eliminated if they do not hit 60%. It is said to be a “sliding scale” and is based on the situation.
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However, there are exceptions to the above. If borrowers cannot fully restore due to issues related to COVID-19 they may still qualify. Issues such as employees that are offered to return do not accept or they cannot find qualified replacements.
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New borrowers can have up to five years to repay the loan. Whereas existing loans have two years but can apply to extend if the lender and borrower agree. The interest will remain at 1%.
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Business will have the ability to delay the payment of their payroll taxes, an option that was originally prohibited.
Check with your lender to see what you can do with these new changes.