On June 3, the Senate passed the House version of the Paycheck Protection Flexibility Act, which will:
- Give businesses 24 weeks to spend their PPP loan proceeds instead of 8 weeks.
- Require that only 60% of proceeds be spent on payroll expenses, versus the previous 75% constraint.
- Extend the deadline that businesses must rehire workers, from June 30 to December 31.
- Provide a loan repayment term of five years instead of two years for any loan dollars not forgiven.
- Allow borrowers to defer the employer share of Social Security taxes (6.2%), regardless of whether the borrower receives forgiveness or not. 50% of deferred Social Security tax would be due in 2021, with the other 50% due in 2022.
These provisions will allow many small businesses to stretch their dollars even further, and not necessitate the issuance of large bonuses or hazard pay to use up the funds.
Note one significant change: The original PPP rules allowed partial loan forgiveness if a company used less than 75% of the loan for payroll, but the new House and Senate bill states that none of the loan will be forgiven if the new 60% threshold is not met. The entire loan will need to be repaid if payroll expenses are less than 60%.
The President is expected to sign the legislation soon.
We are awaiting further guidance on many additional questions that this legislation raises. We will provide additional information as we continue to learn more.
The information contained in this post may not reflect the most current developments, as the subject matter is extremely fluid and constantly changing. Please continue to monitor Yeo & Yeo’s COVID-19 Resource Center for ongoing developments. Readers are also cautioned against taking any action based on information contained herein without first seeking professional advice.