The PPP forgiveness rules continue to evolve. Wednesday night (June 3), the Senate voted unanimously to accept the legislation previously passed by the House and President Trump is expected to sign soon. The Paycheck Protection Flexibility Act extends the deadline for small businesses to spend their PPP funds and still qualify for forgiveness. The new legislation is designed to make it easier for borrowers to reach full, or almost full, forgiveness. You can find the full summary here in the Journal of Accountancy.
However, in a nutshell, current PPP borrowers can choose to extend the “covered period” from 8 to 24 weeks. New borrowers will have the full 24 weeks but the covered period can’t extend beyond December 31. The required use of funds for payroll expenditures drops from 75% to 60%, however due to a drafting error, as of now borrowers MUST spend at least 60% on payroll costs or none of the loan will be forgiven. This new legislation also takes into account borrowers who could not find qualified employees or were unable to restore business operations to Feb. 15, 2020 levels due to COVID-19 related operating restrictions. Lastly, new borrowers have five years to repay the loan instead of two. Existing loans can be extended to five years IF the lenders and borrower agree but the interest rate remains 1%.
Again, the full summary is clearly outlined in the Journal of Accountancy. As always, your Pugh CPAs advisor is here to ensure you have a clear understanding of this newly passed legislation and how it affects your business. Do not hesitate to call or email.