Law provides additional flexibility for employers to get their loans forgiven.
On Friday, President Trump signed legislation to increase the flexibility for employers to use funds issued under the Paycheck Protection Program (PPP) and have those loans forgiven. Key provisions of the law extend the time allotted for PPP loan recipients to spend the funds and still qualify for forgiveness of the loans from 8 to 24 weeks and lower the payroll spending requirement to 60% of the loan amount from 75%.
In a joint Statement by Treasury Secretary Steven Mnuchin and SBA Administrator Jovita Carranza said, “We want to thank President Trump for his leadership and commend Leader McConnell, Leader Schumer, Speaker Pelosi, and Leader McCarthy for working on a bipartisan basis to pass this legislation for small businesses participating in the Paycheck Protection Program.
“This bill will provide businesses with more time and flexibility to keep their employees on the payroll and ensure their continued operations as we safely reopen our country,” the statement continued.
The SBA detailed upcoming procedures that will be undertaken to revise the PPP loans and forgiveness rules.
SBA, in consultation with Treasury, will promptly issue rules and guidance, a modified borrower application form, and a modified loan forgiveness application implementing these legislative amendments to the PPP. These modifications will implement the following changes:
- Extend the covered period for loan forgiveness from eight weeks after the date of loan disbursement to 24 weeks after the date of loan disbursement, providing substantially greater flexibility for borrowers to qualify for loan forgiveness. Borrowers who have already received PPP loans retain the option to use an eight-week covered period.
- Lower the requirements that 75 percent of a borrower’s loan proceeds must be used for payroll costs and that 75 percent of the loan forgiveness amount must have been spent on payroll costs during the 24-week loan forgiveness covered period to 60 percent for each of these requirements. If a borrower uses less than 60 percent of the loan amount for payroll costs during the forgiveness covered period, the borrower will continue to be eligible for partial loan forgiveness, subject to at least 60 percent of the loan forgiveness amount having been used for payroll costs.
- Provide a safe harbor from reductions in loan forgiveness based on reductions in full-time equivalent employees for borrowers that are unable to return to the same level of business activity the business was operating at before February 15, 2020, due to compliance with requirements or guidance issued between March 1, 2020 and December 31, 2020 by the Secretary of Health and Human Services, the Director of the Centers for Disease Control and Prevention, or the Occupational Safety and Health Administration, related to worker or customer safety requirements related to COVID–19.
- Provide a safe harbor from reductions in loan forgiveness based on reductions in full-time equivalent employees, to provide protections for borrowers that are both unable to rehire individuals who were employees of the borrower on February 15, 2020, and unable to hire similarly qualified employees for unfilled positions by December 31, 2020.
- Increase to five years the maturity of PPP loans that are approved by SBA (based on the date SBA assigns a loan number) on or after June 5, 2020.
- Extend the deferral period for borrower payments of principal, interest, and fees on PPP loans to the date that SBA remits the borrower’s loan forgiveness amount to the lender (or, if the borrower does not apply for loan forgiveness, 10 months after the end of the borrower’s loan forgiveness covered period).
- In addition, the new rules will confirm that June 30, 2020, remains the last date on which a PPP loan application can be approved.
According to CollisionWeek research, 93.6% of collision repair facility respondents had applied for government-backed loan and grants and over 72.7% had received funds by the end of April. Over 45% of respondents indicated they would bring back workers that had been previously laid-off as a result of receiving the loan or grant.
Small business advocates applauded the revisions.
Kevin Kuhlman, Vice President of Government Relations for the National Federation of Independent Business (NFIB), said, “The President’s signing of the Paycheck Protection Program Flexibility Act of 2020 into law is welcome news for small businesses across our nation. This will grant small business owners much-needed flexibility as many are reaching the end of their PPP forgiveness period. We thank the President for signing this bill into law, and we look forward to continuing to work with the Administration on the implementation and improvement of this program.”