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Changes to the Paycheck Protection Program


Last week, the President signed into law the Paycheck Protection Program Flexibility Act (PPPFA) relaxing the rules regarding the use of funds from the Paycheck Protection Program (PPP). The Act provides changes to the acceptable use of PPP loan proceeds and how proceeds can be spent in order to obtain loan forgiveness. The Act amended some of the PPP rules and provides businesses with the following relief:

  1. Reduces the ratio requirement of payroll related expenditures from a PPP loan. Borrowers must spend 60% (down from 75%) of the total loan proceeds on payroll costs in order to qualify for full loan forgiveness.The remaining funds can be spent on certain qualified non-payroll items such as rent, mortgage interest, and utilities; eligible expenses in this category have not changed. This amended Act originally contained a very important caveat with regard to payroll related costs, stating that if a borrower fails to spend at least 60% of the loan proceeds on payroll costs, NONE of the loan will be forgivable. It has recently been clarified to allow a partial loan forgiveness if this 60% threshold is not met, as it was under the 75% threshold.

  2. Changes the eligibility for loan forgiveness by extending the time period for businesses to spend the loan proceeds from 8 weeks to 24 weeks from the loan’s origination date, if desired, not to exceed December 31, 2020.

  3. Increases the loan term from 2 years to 5 years while retaining the 1% interest rate.

  4. Permits businesses seeking loan forgiveness to defer certain payroll taxes without penalty.

  5. Extends the deadline from June 30, 2020 to December 31, 2020 to restore reductions in workforce or reductions in worker pay that would otherwise limit or reduce the amount of loan forgiveness.

  6. Provides exceptions in eligibility for loan forgiveness when borrowers unsuccessfully attempt to rehire laid-off employees, and are unable to hire similarly qualified employees for unfilled positions within the required timeframe so long as the borrower is able to document good faith efforts to do so.

We anticipate this is not the last we will hear with regard to PPP requirements, so please watch for future updates as new information and/or clarifications become available.

As always, please reach out to us if we can be of assistance in clarifying the requirements of the act, or helping to plan for appropriate allocation of your PPP funds.

About the Author - Galit Shkurenko recently joined ECS Financial Services, Inc. as an Accounting Supervisor. Galit has more than 12 years of experience in public accounting and has provided audit, review, compilation and accounting services in a variety of industries including manufacturing, distribution and healthcare organizations, HUD multifamily housing, employee benefit plans, not-for-profit, and others. Galit received her Bachelor of Science degree in Accounting and Finance from DePaul University in 2007. In her free time, Galit enjoys outdoor activities, home improvement projects, but mostly catching up with her family and friends.

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