Today the Paycheck Protection Program Flexibility Act (PPPFA) was signed into law. The Act is intended to ease the rules of the PPP. A summary of the changes follows:
• Instead of eight weeks, borrowers will now have 24 weeks from the disbursement of their loan to use the PPP funds, or until Dec. 31 when the program is now set to end. Borrowers can still opt, however, to use funds in the original eight-week period.
• Employers now have to spend 60 percent—rather than the previous 75 percent—of PPP funds on payroll costs. Payroll costs include:
Salary, wages, commissions and tips—up to $100,000 annualized for each employee.
Employee benefits, including paid leave, severance pay, insurance premiums and retirement benefit.
State and local taxes assessed on pay.
The additional 40 percent could be spent on mortgage interest, rent, utilities and other costs.
• Employers now have until Dec. 31, rather than June 30, to rehire certain laid-off workers if they are seeking loan forgiveness. If a suitable offer of employment is turned down by the employee, employers must meet five conditions to avoid having their loan forgiveness reduced. Businesses must:
1. Clearly present an offer letter in writing to the laid-off worker.
2. Offer the same salary, wages and number of hours the employee had prior to the layoff.
3. Receive a rejection of the offer.
4. Document the offer and the rejection. “The refusal does not need to be in writing but should be documented and kept in the employer’s PPP loan forgiveness file,” he said.
5. Notify the state unemployment office within 30 days of the date the offer is refused (InTANDEM can do this for you, we just need to have steps 1-4 from you and then we will send the state a letter).
• The new act extends the maturity date of the PPP loans—for any portion of a PPP loan that is not forgiven—from two years to five years. With respect to already existing PPP loans, the act states specifically that nothing in the act will “prohibit lenders and borrowers from mutually agreeing to modify the maturity terms of a covered loan.”
We’re excited about the changes to the PPP that will give us more time and options for the loans as well as extended forgiveness. We welcome any questions you have regarding the PPPFA.
