Congress Passes PPP Reform Bill

We have a slightly longer, more in-depth view of the new reform bill here.

The Paycheck Protection Program (PPP) was unveiled with great fanfare when the CARES Act was signed by President Trump on March 27, 2020. The program appeared to be a huge lifeline to small businesses battered by the COVID-19 pandemic. Unfortunately, from an application rollout littered with frustration and roadblocks, to frequently changing guidance, and finally a mind-numbing 11-page forgiveness application; borrowers have become irritated to the point where demand for PPP loans was negative in the month of May. As of June 3, 2020, there is still more than $100 billion left in the program.Despite all the defects and difficulties, PPP borrowers received a gift last night (June 4, 2020). The Paycheck Protection Program Flexibility Act of 2020 (Act) passed the Senate by unanimous voice vote and will now go to President Trump for signature. This legislation creates additional flexibility for which borrowers have been clamoring.Among the changes in the Act:

• The loan term of any unforgiven funds is extended from 2 years to 5 years
• Borrowers applying for PPP forgiveness are now allowed to take advantage of the payroll tax deferment offered under the CARES Act
• Borrowers can spend up to 40% of the PPP on eligible non-payroll costs; it was previously capped at 25%
• The covered period for use of the funds is extended from 8 weeks to the earlier of 24 weeks from loan disbursement or 12/31/20. Borrowers can elect to keep the original 8 week covered period.
• The forgiveness application is due 10 months after the end of the covered period
• Finally, the safe harbor date has been pushed from 6/30/20 to 12/31/20; allowing borrowers an additional 6 months to rehire and restore their workforce

For now, the complex forgiveness application remains in force. Multiple organizations and associations, many from the banking industry, are lobbying for an easier forgiveness application “short form” for borrowers under a certain dollar value or blanket forgiveness on loans under $150,000.

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The information provided in this communication is of a general nature and should not be considered professional advice. You should not act upon the information provided without obtaining specific professional advice. The information above is subject to change as a result of rapidly evolving legislative developments and government guidance.  

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