Changes Coming to PPP Loan Periods & Forgiveness
On Friday, June 5th, President Trump signed the Paycheck Protection Flexibility Act, which includes several significant changes to the Paycheck Protection Program (PPP).
Following is a brief summary of the most significant changes PPP borrowers will see:
Covered Period Extended
The law extends the 8-week covered period following the loan’s origination period to 24 weeks or to December 31, 2020, whichever comes first. This additional time to incur forgivable costs is particular critical to businesses who have not yet been able to re-open fully or partially due to state or local restrictions. It not only increases the ability for businesses to achieve maximum loan forgiveness but, and maybe more importantly, it opens up new opportunities for maximizing the overall business benefit of this added liquidity.
Payroll Minimums Decreased
Previously, PPP borrowers were required to apply a minimum of 75% of the loan amount to payroll costs. That amount has decreased to 60%, giving borrowers more flexibility in how they apply loan amounts to other eligible costs.
Forgiveness Deadline Extended
The law extends the forgiveness-related deadline of June 30th to December 31st, meaning as long as businesses are able to restore the February 15th levels of full-time equivalent employees (FTEs) or salary/hourly wage prior to the end of 2020, no attributable reduction in forgiveness will be required. Additionally, the Paycheck Protection Flexibility Act includes exceptions for borrowers who are unable to restore their FTE levels due to COVID-19 related restrictions issued by certain governmental authorities.
Payroll Tax Deferral
The legislation allows PPP borrowers to also defer payment of their 6.2% share of Social Security payroll taxes through the end of 2020, which was originally prohibited under the CARES Act once the PPP loan was forgiven.
We are closely monitoring these and any additional changes as well as waiting for formal authoritative guidance from the U.S. Treasury. We will keep you informed to any news; in the meantime, please reach out if you’d like to begin discussions on how these changes will impact your business goals and/or if you’d like MFA to handle the PPP forgiveness application process for you.
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