Senate passes PPP measure increasing flexibility for small business loans
Changes to the Paycheck Protection Program (PPP) moved forward on June 3 with the U.S. Senate’s passage of a bill that aims to amend the COVID-19 relief business loan program in several key areas.
The legislation was previously passed in the House on May 28, and with the Senate’s passage, was sent to President Trump, who signed it into law June 5. It includes the following important proposed amendments to the PPP ‒ read our previous full recap of the changes for a more detailed summary.
Repayment term: The repayment term for any amount not forgiven is extended from two years to five years. This change only applies to loans made on or after the date of enactment of the Paycheck Protection Program Flexibility Act, but the statute does not prohibit lenders from voluntarily extending the maturity of outstanding loans.
Forgiveness provisions: The “Covered Period,” which constitutes the period during which expenses count toward the forgiveness amount, is significantly extended to the earlier of Dec. 31, 2020, or 24 weeks after the date of loan funding. In addition, it creates new safe harbors that prevent a reduction in loan forgiveness based on reduction in FTEs. It also reduces the required percentage of the forgiveness amount that must consist of payroll costs. The deadline for applying for forgiveness could be as late as Oct. 31, 2021.
Payroll tax deferral: The provision of the CARES Act preventing businesses that receive loan forgiveness under the PPP from also taking advantage of delayed payment of payroll taxes is eliminated under the new legislation. This is another significant improvement to the PPP program for businesses. This change is retroactively effective.