President Signs Legislation Expanding Flexibility and Timelines for PPP Borrowers
Jun 05, 2020
Origin: ASRM Bulletin
- PPP borrowers may now extend their eight-week loan period to 24 weeks. This is optional.
- The Senate-passed bill also changes a 75-25 divide that the March bill included, requiring borrowers to spend 75 percent of loans on payroll and the remaining 25 percent on other fixed costs such as rent and utilities. In the newly passed bill, this is revised to a 60-40 ratio.
- Borrowers now have five years, instead of two, to repay the loan at a 1% interest rate.
- Importantly, borrowers must spend at least 60% on payroll to be eligible for loan forgiveness. Under the March legislation, a borrower is required to reduce the amount eligible for forgiveness if less than 75 percent of eligible funds are used for payroll purposes, but they remain eligible for forgiveness even if that 75 percent threshold isn’t met).
- Borrowers may use the 24-week period to restore workforce levels and wages to the pre-pandemic levels required for full forgiveness, provided that they do so by December 31 (this has been extended – the CARES Act had set a June 30 deadline).
- There are two new exceptions allowing borrowers to achieve full PPP loan forgiveness even if they do not fully restore their workforce. Earlier guidance allowed borrowers to exclude from such calculations employees who turned down good faith offers to be rehired at the same hours and wages as before the pandemic. In contrast, the new legislation allows borrowers to adjust if they demonstrate that they cannot find qualified employees or are unable to restore business operations to February 15, 2020 levels due to COVID-19-related operating restrictions.
- Borrowers can now defer the employer’s share of FICA payroll taxes for two years. Half of the payroll taxes will be due in 2021, with the rest due in 2022.
- The Senate did amend the legislation to clarify that these loans will not be automatically reauthorized through the end of year, meaning the deadline to apply remains June 30.