Rigby Financial Group Blog

Rigby Financial Group Blog

Senate Passes Bill to Relax PPP Loan Forgiveness

5 June 2020

On Thursday, June 3, 2020, the U.S. Senate passed the House Paycheck Protection Program Flexibility Act by unanimous vote.

There is good news here – the legislation, now with President Trump for signature:

• Extends the window businesses have to use the PPP Loan funds (covered period) from 8 weeks to 24 weeks.

• Reduces the percentage of PPP loan proceeds which are required to be used for payroll-related expenses from 75% to 60%, leaving 40% available for other covered expenses, such as rent, mortgage payments, and utilities.

• Pushes the June 30, 2020 deadline for rehiring workers (in order for those employees not to count against an employer’s PPP loan forgiveness) to December 31, 2020.

• Provides flexibility for business owners who can demonstrate that they were unable to rehire workers, or that they were unable to open due to government mandated business closures or inability to meet safety standards and still maintain the same number of workers.

• Extends the repayment period for PPP loans from 2 years following issuance of the loan to 5 years. Interest of 1% is unchanged.

However, several Senators voted “yea” despite concerns. Senator Susan Collins of Maine noted that under the current drafting, small businesses whose payroll-related costs fall under 60% of PPP loan expenditures will be ineligible for any loan forgiveness. This is a departure from previous language, which allowed for proportional forgiveness even if an employer did not meet the 75% threshold.

Other concerns included the lack of granular data from the SBA on actual loans approved and funded, despite Senate requests dating back weeks.

Majority Senate Leader Mitch McConnell acknowledged the bill’s flaws, but stressed the need for immediate action. He stated his hopes that the flaws would be addressed by Congress in the future.

Nevertheless, we commend the Senate action as necessary – particularly for businesses in which payroll costs are lower compared with other overhead, such as those in the restaurant industry.

It is worth noting that some $120 billion in PPP loan funds have not yet been distributed – it is not too late to apply, if you qualify.

If you are at all uncertain about PPP Loan Forgiveness or the Application, please seek guidance from your advisor. You will want to make sure you get your facts and figures in order before submitting your loan forgiveness application to your lending institution.

New legislation notwithstanding, we recommend that you track your covered expenses and time periods meticulously, and that you gather and maintain documentation verifying the number of full-time equivalent employees and their pay rates (there are several dates for which this one task must be performed), as well as your payments of eligible payroll costs, eligible mortgage and interest payments, rent, and utilities.

Stay tuned for further developments, which will be coming!

If you have questions on the PPP, please click here to email us directly – we are here to help.

Until next Wednesday –

Peace,

Eric

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