New Rules for Paycheck Protection Program Loans

On Friday, June 5th President Trump signed into law the Paycheck Protection Flexibility Act, after it swiftly passed through Congress early last week. This new law makes several changes to the popular Paycheck Protection Program (PPP), which was created to extend forgivable loans to businesses & the self-employed given the economic fallout of COVID-19. 

Here are the key changes:
Only 60% of the funds need to be used for payroll expenses to qualify for loan forgiveness (vs. 75% originally).

However if you don’t use at least 60% on payroll, then NONE of the loan is forgivable. Under the old rules, a portion of the loan was still forgivable even if you didn’t meet the minimum threshold.

coronavirus relief for small businesses
Key changes being made to the PPP loan program
Borrowers now have 24 weeks (instead of 8) to spend their PPP money and qualify for loan forgiveness.
  • If your PPP funds aren’t deposited until after 7/15/2020 – you actually only have until 12/31/20 to spend the funds (it is by the earlier of 24 weeks OR 12/31/20)
  • They also get 24 weeks (by 12/31/20) to restore their workforce & wages to pre-pandemic levels.
  • Exceptions may also be granted if the business is unable to find qualified employees or restore operations within that 24 week window.
  • Note, businesses are also allowed to exclude laid-off/furloughed employees who turn down “good faith” offers for re-employment.
  • You can still opt for 8 weeks if you wish (i.e. if you’ve already achieved >60% use on payroll, or worried about maintaining employees or staying in business).
NEW recipients who don’t end up qualifying for forgiveness have 5 years to repay the loan (vs. 2 years originally).

Those who borrowed under the old rules can extend repayment to 5 years as well, but the lender has to agree to it first. In either case the interest rate is still 1%.

Businesses which took PPP loans are allowed to defer payroll taxes (originally prohibited by the CARES Act).

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