It is busy times for business owners. Several are open— under new parameters— or are preparing to re-open their doors. We also continue to learn more about complying with the Paycheck Protection Program (PPP). New legislation relaxes the rules and extends the deadline. This is highly awaited reform since the release of the Small Business Administration (SBA), with the Department of the Treasury, PPP loan forgiveness application last month.
Notable points for business owners on the PPP Flexibility Act include:
- PPP loans will be forgiven if a business spent 60% of the loan money on payroll during the covered period. Initially that figure was 75%.
- Businesses have more time to spend the money. The covered period is now 24 weeks (6 months) instead of 8 weeks (2 months), or December 31 if earlier.
- If borrowers are not able to get the PPP loan forgiven, they have 5 years to pay off the loan; instead of 2.
- Borrowers have until December 31, instead of June 30, to replace their FTEs (full time equivalent) back to February levels.
- Businesses can defer the employer portion of Social Security taxes until 2022. 50% paid in 2021 and the remainder in 2022.
The covered period remains the PPP loan disbursement date. However, the new bill extends the period for when a business can apply for loan forgiveness. Its is 10 months of the last day of the covered period. Also, PPP loan interest and payment of principal and fees will be deferred, until the loan is forgiven by the lender.
The SBA and the Treasury Department announced they will issue rules and guidance; a modified application form; and a modified loan forgiveness application.