Changes included in a bill likely to be signed into law will relax some use requirements and extend deadlines for repayment and other actions.
The U.S. Small Business Administration's Paycheck Protection Program is likely to become more flexible for small business owners, thanks to a set of changes that will expand how PPP funds can be used and will extend deadlines for repayment, among other provisions.
The changes, included in a bill dubbed The Paycheck Protection Flexibility Act, were approved by the U.S. House of Representatives in late May, and passed the Senate on June 4. The bill is now on its way to the president''s deskfor his expected signature. The changes are anticipated to be put into effect relatively quickly after that.
Here's a rundown of what's changing:
The loan repayment period will expand from two to five years.
PT private practices and small businesses that received the PPP loans and are not eligible for loan forgiveness will have their deadlines for repayment to extended to five years after receiving the loan.
PPP recipients will get a payroll tax deferral.
The CARES Act provides deferment of payments made by employers to the employer’s portion of Social Security taxes; the Paycheck Protection Program Flexibility Act adds PPP recipients to this tax break, thereby providing more cash on hand to keep paying employees.
The loan forgiveness period will be increased from eight to 24 weeks.
The previous deadline of eight weeks to spend the loan and qualify for forgiveness was fast approaching for most recipients of PPP funds. This change allows businesses more time to bounce back while still qualifying for loan forgiveness.
The percentage of PPP funds that must be devoted to payroll will drop from 75% to 60%.
Businesses will be allowed to use 40% of PPP funds for overhead costs including rent, supplies, and outside loan payments.
The rehiring deadline will be extended to the end of 2020.
In response to concerns that many small businesses need more time to begin rehiring after the pandemic triggered furloughs and layoffs, the bill moves the deadline for using PPP funds to rehire former employees to the end of the year.
For more information on loan forgiveness and the following changes visit the SBA website.