On July 4, President Trump signed a new law extending the deadline for applying for a Paycheck Protection Program (PPP) loan from June 30 to August 8. The program has so far distributed about $520 billion in loans to almost 5 million small businesses across the country.
The program had expired on June 30, but in a surprise move last week, the Senate and House both unanimously voted to give borrowers more time to access the program under the existing terms. Approximately $130 billion in funding remains.
The extension of the application deadline follows the enactment of the
Paycheck Protection Program Flexibility Act of 2020 (PPPFA), signed into law on June 5.
The primary impact of the PPPFA is that it provides the over 4.4 million Paycheck Protection Program (PPP) borrowers additional time to qualify for forgiveness and eases the restrictions on how much of the forgivable portion of the loan proceeds must be used for payroll costs.
There also is a simpler, shorter forgiveness application form that
requires borrowers to submit less data to their lender and the federal government.
Notably, the EZ forgiveness application form requires less detail from applicants and does not require the PPP worksheet, which in the longer application requires borrowers to include employee-level detail on how PPP dollars are used.
If you meet at least one of the three requirements below, you may be able to complete and submit the EZ PPP loan forgiveness application.
- You are self-employed and do not have any employees.
- You did not reduce your employees' hours or their salaries or wages by more than 25%.
- You experienced reductions in business as a result of health directives related to COVID-19 AND did not reduce the salaries or wages of your employees more than 25%.
Key Provisions of the PPPFA:
- The PPP Flexibility Act amends the PPP to give borrowers more time to spend loan funds and still obtain forgiveness.
- Borrowers now have 24 weeks to spend loan proceeds, up from 8 weeks.
- The Act also reduces mandatory payroll spending from 75% to 60%.
- Two new exceptions let borrowers obtain full forgiveness even without fully restoring their workforce.
- Changes made by the PPPFA have been incorporated in new forgiveness applications released by the SBA.
- Time to pay off the loan has been extended to five years from the original two.
- The Act now lets businesses delay paying payroll taxes even if they took a PPP loan.
Under previous PPP loan guidance, borrowers had eight weeks from the time they received the first loan installment to spend the funds. The PPP Flexibility Act of 2020 lets them extend that period to 24 weeks (but not beyond Dec. 31, 2020).
They also have the option to keep the original eight-week spending period if they already had their loan before enactment of the Act. Under the new timeline, full forgiveness is still possible.
The original PPP loan guidelines mandated that 75% of any forgiven amount had to be spent on payroll costs.
The Flexibility Act reduces required payroll expenditures to 60% of the loan amount with up to 40% of the loan amount used for mortgage interest, rent or utility payments to obtain full loan forgiveness of that amount.
Or, part of the loan can be forgiven provided the borrower maintains the same 60/40 ratio for the amount forgiven. This change responds to complaints from many businesses that their payroll costs went down as employees were laid off but fixed costs like rent did not.
Borrowers can now use the new 24-week period to restore their workforce to pre-COVID-19 levels in order to obtain full forgiveness. The new deadline to achieve this is Dec. 31 vs. the previous deadline of June 30.