June 19, 2020
Two weeks ago, the PPP Flexibility Act was signed into law. The most notable changes to the original PPP program included:
- An allowance that the Borrower could elect to use 24 weeks instead of 8 weeks as their covered period for their allowable payroll and non-payroll costs to be used and applied for forgiveness;
- An ability to use up to 40% of the loan proceeds for non-payroll costs;
- An ability to anywhere from 60%-75% of the loan proceeds for payroll costs;
- An increase in the deferment period to either when the SBA makes a forgiveness determination, or 10 months after the covered period if no forgiveness is sought.
- For new loan applicants, the loan maturity date changed from 2 to 5 years.
If you received your PPP loan prior to the passage of the Flexibility Act, all of the changes noted above apply to you with the exception of the maturity date. For that, prior loan holders should contact their lenders.
For the employers with employees, other changes include:
- An extension in the deadline to restore FTE headcounts to the end of 2020.
- An expansion in “safe harbor” provisions for employers who cannot rehire individuals or replace them or cannot return to the same level of pre-COVID-19 business levels due to compliance with CDC, OSHA, or DHS directives.
- An ability to defer 2020 payroll taxes even if the employer receives loan forgiveness.
With all of these changes, two new forgiveness applications were issued this week. The first – the “EZ” application – is substantially shorter than its predecessor. While many may appreciate the change in length, for others they may be missing some of the helpful calculation instructions and application term definitions. The 2nd version is an updated version of the longer “old” application that includes the new covered period and use ranges.
Many business owners will elect to utilize the expanded covered period, but they should evaluate this with their legal and tax advisors to ensure there are not any pitfalls to that approach. If you have questions on which covered period you should choose, or other questions on PPP Loans and/or Forgiveness, the Law Offices of Lindsey King, LLC may be able to help. Please contact us for an evaluation call.
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1. The information above does not constitute legal advice, nor does it create an attorney-client relationship. Please consult your attorney with specific questions.
2. As this situation is constantly changing, we will make every effort to stay current on this topic, however this information is provided as general guidance and may not apply to your situation, nor should it be relied upon exclusively. Please consult and confirm with your attorney if you have questions about these updates or their applicability.
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