If you borrowed money under the federal Paycheck Protection Program (PPP), you should know about new changes that give you more flexibility in using the money and paying it back.
President Trump just signed into a law a measure that brings much-needed relief for borrowers. The bill was recently approved in the House and Senate.
Here are some highlights.
- Extension of covered period. PPP borrowers can choose to extend the eight-week period to 24 weeks. The flexibility is designed to make it easier for more borrowers to reach full, or almost full, forgiveness.
- You can spend more of your proceeds on non-payroll costs — but be careful. The payroll expenditure requirement drops to 60% from 75%. Borrowers must spend at least 60% on payroll, or none of the loan will be forgiven. Currently, a borrower is required to reduce the amount eligible for forgiveness if less than 75% of eligible funds are used for payroll costs, but forgiveness isn’t eliminated if the 75% threshold isn’t met.
- You’ll have longer to replace FTEs/restore salaries: Borrowers can use the 24-week period to restore their workforce levels and wages to the pre-pandemic levels required for full forgiveness. This must be done by Dec. 31, a change from the previous deadline of June 30.
- Businesses that remain partially or fully closed through the end of the year will get new relief: The legislation includes two new exceptions allowing borrowers to achieve full PPP loan forgiveness even if they don’t fully restore their workforce. Previous guidance allowed borrowers to exclude from those calculations employees who turned down good faith offers to be rehired at the same hours and wages as before the pandemic. The new bill allows borrowers to adjust because they could not find qualified employees or were unable to restore business operations of Feb. 15, 2020, due to COVID-19 restrictions.
- Any unforgivable amount has more favorable terms: Borrowers now have five years to repay the loan instead of two. The interest rate remains at 1%.
- You can defer certain payroll taxes even if you received a PPP loan: The revisions allow businesses that took a PPP loan to also delay payment of payroll taxes, which was prohibited under the CARES Act.
Have questions on making the most of your financial planning? Go here to reserve time to speak with one of our coaches for free!