The Paycheck Protection Program (PPP) Flexibility Act signed June 5 by President Donald Trump amends key parts of the pandemic loan program for small business owners.
HR7010 makes key changes to parts of the Paycheck Protection Plan.
PPP Flexibility Act Signed Into Law
Some of these changes will surely be welcomed by small business owners who’ve received PPP funds recently. You have more time to apply, more time to use the money, and more time to rehire employees.
Application Deadline Extended
If you have applied or are applying for a PPP loan and was stressing about the June 30 deadline to make the application, breathe a sigh of relief. The Flexibility Act extends the deadline to December 31, 2020.
Loan Use Time Extended
The PPP was designed to provide about 10 weeks of cash flow by covering expenses during that period of time. The period to use the PPP loan money has been extended to 24 weeks. Last-ditch efforts tried to change that to 16 weeks but the bill passed with extension to 24 weeks.
In other words, maybe you got the PPP money, but your expenses for 10 weeks weren’t nearly as high. Expenses were lower because you were closed. You didn’t use all the PPP money you got. That’s okay. The Flexibility Act lets you spread out paying expenses for 24 weeks.
Change to Rehiring Employees Requirements
Another stress – you’re not going to be able to rehire all your employees to get back to full staff. The original guidelines for the PPP were that in order to get loan forgiveness, you had to get back to full-staff by June 30.
The Flexibility Act changes that deadline to December 31, 2020. This gives small business owners an additional 6 months to rehire staff or hire new employees to recover the staff number.
The additional time is great. But what if you find you can’t do it? What if – because of the way you are now doing business – you no longer operate with the same staff size?
Now that you’ve reopened, you may be operating with a lower number of employees and/or lower employee salaries. In other words, you can’t return to the same level of business you enjoyed on February 15, 2020. That’s because the way you operate your business has changed.
You can still get loan forgiveness. You have to document that you tried to rehire employees but were hampered because of government restrictions.
For example, you operated a restaurant but now due to seating spacing requirements, you won’t be able to have as many customers. You won’t need as many wait staff.
Or you operate a beauty salon and can’t cycle through as many customers, due to cleaning requirements between customers.
The examples are as endless as the variety of small businesses. As a rule, document everything. In addition to your business paperwork, keep records of steps that were taken in your state to both close and reopen businesses.
Payback Period Extended
As originally passed, the PPP allowed a business owner 2 years to pay back money if the loan amount wasn’t forgiven. The Flexibility Act extends that period to 5 years.
Paycheck Protection Program Review
The Paycheck Protection Program provides the structure for a 100% federally guaranteed loan. The PPP loan can help small business owners cover basic operating costs, including payroll, rent or mortgage interest, and utility expenses.
The loan comes from a Small Business Administration loan program participating bank. It can be forgiven later and turned into a non-taxable grant. The loan becomes a grant if certain requirements are met. The Flexibility Act amends some of those requirements.
The Paycheck Protection Program is part of the Coronavirus Aid, Relief and Economic Security (CARES) Act. The PPP was developed by the US Senate Committee for Small Business and Entrepreneurship and was funded with $350 billion.