President Signs Legislation Addressing Concerns of Original Paycheck Protection Program
Changes in PPP loan forgiveness terms is good news for small businesses
To further help small businesses manage the economic impact of the COVID crisis, the President signed legislation (H.R.7010) to improve the Paycheck Protection Program (PPP) on June 5, 2020. The PPP has distributed $510 billion in loans to date and has another $150 Billion available. Loans will be forgiven if the borrower meets certain conditions; the legislation signed today makes the PPP more business friendly.
The major PPP changes focus on the length of time to use funds and the share of money dedicated to payroll. PPP loan funds can now be used over a 24 week period, previously businesses only had 8 weeks. Nearly a quarter of businesses with PPP loans were scheduled to hit the eight week deadline next week. No new funds would be added to the program as the lending pace has slowed significantly over the past few weeks.
Under the new PPP terms, businesses would have to use 60 percent of the loan on payroll as opposed to the previous 75 percent requirement. Businesses failing to meet the 60 percent payroll threshold would have to pay back the loan in full. Senator Marco Rubio (R-FL) Chairman of the Senate Small Business Committee is committed to modifying loan repayment terms to only require repayment of the amount below the 60 percent payroll threshold.
Businesses not meeting the loan ‘forgiveness’ requirements now have five years to pay back the loan up from two year repayment schedule in the original PPP.
In a move to appease Senator Ron Johnson (R-WI), the Senate agreed that the loan program will extend to December 31, 2020 but the loan application deadline will remain June 30, 2020.