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New PPP rules changes give small businesses more options

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The recently enacted Paycheck Protection Program (PPP) Flexibility Act provides additional clarity and flexibility for small business owners to meet the requirements of the PPP loan program created by the Coronavirus Aid, Relief, and Economic Security Act. When the President signed the bipartisan legislation into law, it gave more time and discretion for when and how the loans can be spent to keep employees on payroll and keep up with accounts payable to further assist the nation’s economy’s recovery from COVID-19.

The SBA will issue rules and guidance, a modified application form, and a modified loan forgiveness application.

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The SBA will issue the following amendments:

1. Extend the loan forgiveness period from eight to 24 weeks after loan disbursement. Borrowers who have already received PPP loans retain the option to use the eight-week covered period.

2. Lower the forgiveness requirement for borrowers to use 75% of loan proceeds and loan forgiveness amount be used for payroll costs to 60 percent. If a borrower uses less than 60 percent for payroll, the borrower remains eligible for partial loan forgiveness.

3. Provide loan forgiveness safe harbor based on reductions in full-time equivalent (FTE) employees for borrowers who are unable to return to the same level of business at which they were operating before February 15, 2020 due to compliance with COVID-19 requirements or guidance issued between March 1, 2020 and December 31, 2020 by the Secretary of Health and Human Services, the Director of the Centers for Disease Control and Prevention, or the Occupational Safety and Health Administration.

4. Provide loan forgiveness safe harbor based on reductions in FTE for borrowers unable to rehire employees or hire similarly qualified employees for unfilled positions by December 31, 2020.

5. Increase to five years the maturity of PPP loans approved by SBA (based on the date SBA assigns a loan number) on or after June 5, 2020.

6. Extend the deferral period for payments of principal, interest, and fees on PPP loans to the date that SBA remits the borrower’s loan forgiveness amount to the lender (or, if the borrower does not apply for loan forgiveness, 10 months after the end of the borrower’s loan forgiveness covered period).

Additionally, the new rules confirm that June 30, 2020 remains as the last date upon which a PPP loan application can be approved. More than $130B remains in available PPP funding as of June 4.


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