Paycheck Protection Program Flexibility Act: What You Need to Know

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Posted by Brad Mols on Jun 18, 2020 10:02:55 AM

On Friday, June 5, House Bill 7010, also known as the Paycheck Protection Program Flexibility Act of 2020, was officially signed into law. The most recent PPP bill within the CARES Act offers several significant updates to the existing Paycheck Protection Program loan forgiveness process. The new PPP Flexibility Act is designed to provide financial support to nonprofits and small businesses across the country as well as provide more freedom to borrowers with how and when funds are spent while retaining the possibility of full forgiveness.

Notable Changes to the PPP Flexibility Act

The new legislation also maintains a focus on deploying the millions of dollars that are currently undistributed within the PPP program. Understanding some of the key points and benefits of the Paycheck Protection Program Flexibility Act of 2020 can help ensure you're optimizing this government-backed opportunity. According to the program legislation, some of the biggest things to know:

Extended Forgiveness Deadlines
The biggest news with the latest PPP iteration is that borrowers will have more time to spend their loan funds. Previous PPP programs offered a covered period of eight weeks for borrowers to spend the money, putting excessive pressure on business owners to comply with forgivable expenditure guidelines. Under PPP legislation, borrowers have 24 weeks or until December 30, 2020, to spend the money, whichever comes first. The window of time that a company has to maintain FTE levels also increases, and the period to avoid a reduction in salary and wages in order to qualify for forgiveness has been extended. 

Forgiveness Provisions
With the Paycheck Protection Program Flexibility Act, loan forgiveness is connected to restoring the number of full-time employees earning less than $100,000 with a similar pay amount as before the pandemic began. The new PPP stipulations for ease in rehiring mandates include two additional exceptions. One exception is the inability to hire candidates with similar qualifications. Additionally, exceptions may be made based on a failure to return to pre-COVID-19 levels due to compliance requirements outlined or guidelines issued by OSHA, CDC, or U.S. Department of Health. 

Payroll Cost Requirement
The payroll cost requirement has dropped from 75 percent to 60 percent. This means that now 40 percent can be utilized for other necessary expenses, including rent, mortgage interest, or utilities. The reduction in payroll cost requirement helps drive the likelihood of forgiveness as more of the loan can be used for non-payroll items. 

Loan Maturity
Of course, some distributed funds may not qualify for forgiveness. The PPP Flexibility Act extends the maturity of these loans from two years to five years. The interest rate remains unchanged at 1 percent. 

Application Deadline is Still June 30, 2020

With all the recent updates, it's important to note that the deadline for applying for a Paycheck Protection Program loan has not been extended. The deadline is still June 30, 2020. If your business qualifies, it's essential to submit your application, so you don't miss out on the financial assistance needed to keep your organization as financially healthy as possible during these challenging economic times.

 

Contact Acena Consulting Today

If you conduct research and development at your business, you may be able to use PPP funds to increase staffing for your R&D operations. Contact Acena Consulting today to learn more.

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