We’ve covered the Paycheck Protection Program, or PPP, loans previously in this space – as they’ve been crucial in providing business owners with a way to stay afloat during the COVID-19 pandemic while offering far more flexibility than the conventional loan.
Now, these PPP loans have even more flexibility thanks to the passage of the Paycheck Protection Flexibility Act, which was recently signed into law by President Donald Trump. In this post, we’ll take a look at the two important changes any business that has received a PPP loan needs to be aware of. Both are largely considered “wins” for those that have received PPP loans.
Here’s a look:
Provision 1: More Time
When the PPP loans were first established, businesses had just 8 weeks to use their eligible funds. With the Paycheck Protection Flexibility Act, businesses now have up to 24 weeks to use these funds.
This is good news for most businesses, and for a few reasons. One, it gives businesses that are just now reopening more time to appropriately use the funds and qualify for eventual loan forgiveness by meeting the terms and conditions of the loan. And two, it allows businesses to continue to bring back any employees that it either laid off or furloughed – again, allowing companies to stay in compliance with the requirements for loan forgiveness.
This is a very welcome change, and one that many businesses even lobbied for at the start of the pandemic. It won’t just help businesses that have received PPP loans, but also help more Americans get back to work as the economy reopens.
Provision 2: Reduced Payroll Amount
The other significant change with the Paycheck Protection Flexibility Act is that companies are only required to put at least 60 percent of the loan toward payroll and still be able to receive loan forgiveness. This is down from 75 percent previously, and essentially means the other 40 percent can be used toward other overhead expenses like rent payments, mortgage interest and utility costs.
More Changes in the Future?
These are two big changes to PPP loans, and if you ask certain business experts, more could be on the way. For example, one additional request is that other utility costs like IT and cloud services be considered essential expenses and forgivable under the loan’s terms and conditions. But these two aforementioned provisions are a very good start, and they make things much more flexible for the businesses that need support the most during these times.
If further modifications are necessary, it’s also a good bet that Congress will step up and make them.