The better than expected May jobs report numbers to indicate that for many businesses, the Paycheck Protection Program (PPP) worked as intended. Unfortunately, PPP still left much to be desired, to the point that New York State and City felt the need to create their own programs. With $135 billion in PPP funding waiting to be claimed, Congress created the Paycheck Protection Program Flexibility Act to fix many of the PPP issues. Hopefully, these changes make the loan more appealing to many small and micro businesses:
- Extends the time to use the loan from eight weeks to 24 weeks and gives businesses more time to pay back loans beyond the initial two-year term.
- Eliminates the 75/25 restrictions that said businesses must spend 75 percent of their loans on payroll and only 25 percent on other operating expenses like rent and utilities. The formula changes to 60/40 percent.
- The changes allow businesses to receive payroll tax deferments even if they use the PPP loan program and gives businesses a break from the requirement that it must rehire its employees by June 30, 2020, in order to receive loan forgiveness.
- Extends the deadline to apply for a loan from June 30 to December 31
- Establishes a minimum maturity of five years for a paycheck protection loan with a remaining balance after forgiveness.
- Extends the period in which an employer may rehire or eliminate a reduction in employment, salary, or wages that would otherwise reduce the forgivable amount of a paycheck protection loan.
- Allows recipients to defer payments until they receive compensation for forgiven amounts.
- Eliminates a provision that made paycheck protection loan recipients who had such indebtedness forgiven ineligible to defer payroll tax payments.
Also, The Small Business Association (SBA) announced that $10 billion of the second round of Paycheck Protection Program funding will be lent exclusively to Community Development Financial Institutions (CDFIs).