Paycheck Protection Program Forgiveness Extension

The U.S. Senate passed the House version of Paycheck Protection Program (PPP), which extended how long small businesses have to spend the funds.  The extension was three times the amount previously stated, changing the 8 week period to a 24 week period to spend the amount provided to the small business through PPP, with the ability to still qualify for forgiveness.  This House bill, Paycheck Protection Flexibility Act, was signed by President Donald Trump Friday June 5, 2020.

Summary of the main points made by legislation:

  • Current PPP borrowers have the option to extend their 8-week period to 24 weeks, or they can keep the original 8-week period. Any new PPP borrowers will automatically have the 24 week forgiveness period, but this period cannot extend beyond December 31, 2020. This is in hopes of making it easier for more small businesses to reach full forgiveness.
  • While previously the payroll expenditure requirement was 75% of the loan, this has now dropped to 60%.  With this, 60% of the PPP loan has to be spent on payroll or there will be no forgiveness on the loan.
  • The 24 week period should be used to restore pre-pandemic work force and wage levels, which will be necessary for forgiveness.  The 24 week forgiveness period must be over by December 31, 2020, which is an extension from the previously stated date of June 30, 2020.
  • For those who are not able to fully restore their workforce, there are two new exceptions to assist in achieving full forgiveness.  Borrowers can exclude calculations of employees that turned down good faith offers to be rehired at the same wage and hours prior to the pandemic, which was a part of the prior guidance. The new bill allows borrowers to adjust because they could not restore operations to February 15, 2020  levels or they were unable to find qualified employees, due to COVID-19 operation restrictions.
  • For those who do not reach 100% forgiveness, they will have up to 5 years to repay the 1% loan if both the borrower and lender agree (previously it was up to 2 years repayment and 1% interest).
  • Those who took the PPP loan have the opportunity to delay payment of their payroll taxes, which was prohibited under the CARES Act.


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