Feds Extend the Paycheck Protection Program; Loosen Some Requirements

The period of loan forgiveness is expanded as are the requirements on how funds must be spent

PPP Loan Forgiveness Extension

President Trump has signed an extension to the Paycheck Protection Program, or PPP, that had been passed by the House and Senate. The extension, called the Paycheck Protection Flexibility Act, will extend the period of time for small businesses to use loans from the Small Business Administration and ease the forgiveness requirements on the loans.

Initially the PPP provided employers with a loan for an eight week period to fund payroll, rent, utilities, and other costs during the COVID-19 pandemic, which could be forgiven if a borrower used 75% of the funds to keep employees on payroll rather than lay them off and have them collect unemployment benefits.

Many small businesses remain closed even as the 8 week period going back to when funds were first available is coming to an end. Other businesses found that the requirement that 75% of the loan be used towards payroll did not provide the flexibility required from keeping them from having to close permanently. There has been pressure on the government to amend the PPP, which is what this most recent action does.

Here are the highlights of the Paycheck Protection Flexibility Act:

  • Current borrowers have the option to extend the 8 week loan period to 24 weeks from the origination date. New borrowers will have a 24 week period or until December 31, 2020, whichever comes first.
  • The requirement that 75% of the loan be used for payroll expenses in order to qualify for forgiveness has been ¬†reduced to 60% and not more than 40% on other costs.
  • New borrowers will have five years to repay the loan. Current borrowers may negotiate with their lenders to extend the current two year period up to five years.
  • Exceptions to the requirement that an employer bring full time employees back to February 15th levels if:
    • The borrower cannot find qualified employees for unfilled positions;
    • The borrower cannot restore themselves to previous operating conditions due to continued social distancing, sanitizing requirements, or customer safety.
  • Interest rates on any portion of the loan which is not forgiven remains 1%.

It is expected that additional regulatory guidance will be issued in the coming days. Organizations that already have PPP loans should contact their lender to discuss their options under the Paycheck Protection Flexibility Act for the specific terms and conditions of existing loans.

HR One is providing our payroll clients with reporting tools to assist with providing information to your lender for loan forgiveness. HR One consulting clients can continue to look to us for assistance as they face human resources challenges due to COVID-19, from testing, unemployment benefits, to reopening safely and bringing people back to work.

Visit our COVID-19 Resource Center.