Good News for Small Businesses as Senate Passes PPP Reform Bill

The U.S. Senate passed the House version of the Paycheck Protection Program Flexibility Act on June 3, 2020, easing restrictions on how small businesses can use their PPP loan funds and achieve maximum forgiveness. The legislation was developed after widespread complaints that the PPP’s original terms were too restrictive. PPP loans convert into a federal grant if business owners are able to meet certain conditions.

Key provisions are outlined below:

  • This bill increases the time allowed to spend the funds from eight weeks from the time borrowers received their PPP loans to 24 weeks. The extended covered period for new PPP borrowers cannot extend past December 31, 2020.
  • The amount of PPP funds required to be spent on payroll costs to qualify for forgiveness has been reduced to 60% of the loan amount from 75%. However, borrowers must spend at least 60% on payroll or no amount of the loan will be forgiven.
  • The deadline requiring borrowers to replace or rehire employees and wages to pre-pandemic levels was pushed from June 30, 2020 to December 31, 2020.
  • The new bill allows borrowers to adjust their FTE calculations if they could not find qualified employees or were unable to restore business operations to February 15, 2020 levels due to federally required sanitation, social distancing, or similar requirements.
  • New borrowers now have five years to repay the loan instead of two. Existing PPP loans can be extended up to five years if the lender and borrower agree, and the rate remains at 1%
  • The bill allows businesses to delay payment of the 6.2% payroll tax for two years.

The House passed the legislation last week and now the bill is headed to the President’s desk for signature.

The Small Business Administration had approved PPP loans worth $510.6 billion as of June 3, 2020. More than $120 billion in funding is still available.