PPP Loan Forgiveness Made Easier by Congress

Small businesses given more time and flexibility to use loan proceeds

PPP loan forgiveness just got a lot easier thanks to the “Paycheck Protection Flexibility Act” passed by Congress. This new law gives businesses more flexibility to use the popular PPP loan. This new flexibility will in turn result in an easier time qualifying for complete loan forgiveness.

Here is what you need to know:

December 31, 2020 is the new deadline to spend loan proceeds. When the PPP program was rolled out this spring, businesses were given until June 30, 2020 to spend loan proceeds. Due to the extended stay-at-home orders and further assessment of the pandemic, the new deadline is now December 31, 2020.

More loan proceeds can be used for non-payroll expenses. The original law required 75% of loan proceeds to be spent on payroll. For businesses with high cost of goods sold or who had trouble convincing furloughed workers to return to work, hitting this 75% threshold was problematic. The new law reduces the amount of loan proceeds required to be spent on payroll to 60%.

More flexibility in fully restoring workforce. Borrowers now have through December 31, 2020 to restore their workforce levels and wages to the pre-pandemic levels required for full forgiveness. There are three exceptions allowed for not having a fully-restored workforce by Dec. 31. Borrowers can adjust their loan forgiveness calculations because of:

  • Employees who turned down good faith offers to be rehired at the same hours and wages as before the pandemic;
  • Difficulty finding qualified employees;
  • COVID-19 related operating restrictions

Loan terms extended. For loans that do not qualify for forgiveness, borrowers now have up to five years to repay the loan instead of two. The interest rate remains at 1%.

What you need to do: Remain in contact with your lending institution about the loan forgiveness application. Lastly, reach out to your legislators and let your voice be heard on how you were impacted and share your story on your PPP loan experience as several U.S. Senators indicated that there will be more changes in the future regarding the program.

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