3 Big Changes to the PPP Program with the New Paycheck Protection Flexibility Act
On June 5, President Trump signed the Paycheck Protection Flexibility Act, H.R. 7010, which made several huge changes to the PPP law and that sweet sweet loan forgiveness that goes along with PPP.
We are still waiting for SBA rules to clarify some of these issues, but here is an overview of how the new law changes the PPP program:
24 Weeks Instead of 8 Weeks to Spend. The 8 week covered period is now 24 weeks. So, instead of having only 8 weeks to spend the money, you now have 24 weeks. But, the amount of money has not been increased. If a business chooses to use the 8 week period an 8 week period can still be used.
75/25 rule is now 60/40. Only 60% must be spent on payroll to get forgiveness instead of 75%, which was the previous rule.
New Safe Harbor: The June 30 safe harbor now appears to be gone. (Who knows, maybe the SBA will bring it back.) The new safe harbor rule is that if the business is “unable to return to the same level of business activity of February 15, 2020 by December 31, 2020.” This is great in theory. But, what does it even mean in practice? Specifically, what does “the same level” mean? Is it the same level of sales? The same level of staffing needed for business? Also, what is a “similarly qualified employee” for safe harbor unable to rehire provision? Who decides these things?
New 5 Year Repayment Period for New Loans. New ppp loans are a 5 year repayment instead of 2. The time period to pay back existing loans is not affected.
Expect to see more changes before it is all said and done. Bank industry lobbyists are asking for all loans under $150,000 to be automatically forgiven. That would be cool. Stay tuned.