CONGRESS EXTENDS PAYCHECK PROTECTION PROGRAM
Both houses of Congress have approved a bill making several material modifications to the popular Paycheck Protection Program (“PPP”). The President is expected to sign the bill into law very shortly.
- The 8-week “covered period” during which PPP funds can be spent can now be extended, at the borrower’s option, to 24 weeks, essentially through all of 2020. This means employers can have until then to restore their employment to pre-crisis levels. This can also push back the deadline for submitting an application for loan forgiveness. SBA Form 3508 is the application for forgiveness and is available here.
- The requirement that 75% of PPP funds be spent on qualified payroll expenses is being reduced to 60%. This means more money can be spent on qualified rent, mortgage, debt, and utilities. However, a significant change is that the 60% is now a “cliff”, meaning that none of the loan will be forgiven if 60% of the funds are not spent on qualified payroll expenses. Previously, the formula provided for pro-rata reduction in forgiveness.
- Two new exceptions are added for the requirement that borrowers restore employment to pre-crisis levels. One is where borrowers can document that they could not find qualified employees. The second is where borrowers can document that because of restrictions imposed on their operations because of the crisis, they could not restore business operations to pre-crisis levels.
- For the unforgiven portion of the loan, the payback period is extended from 2 years to 5. The interest rate is unchanged at 1% per year.
- Finally, borrowers can now defer full payment of their portion of FICA payroll taxes for 2 years, paying half in 2021 and half next year.
According to the Small Business Administration, as of May 30, 2020, nearly 4.5 million PPP loans were issued for more than $500 billion. Loans of $50,000 or less account for just over 64% of all loans issued. Average loan size is $114,000. Other interesting statistics are available here. Funding remains available for those who are still considering applying. Further details on PPP can be found here.
This is not intended to be legal advice. You should contact an attorney for advice regarding your specific situation.
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Gary M. Schuster is partner at the firm and practices business, non-profit, and arts and entertainment law. He can be reached at 866-303-9595 toll free or 845-764-9656 and by email.