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Changes to the Paycheck Protection Program

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 b