Knowledge and Insights

Changes to PPP – What Should You Know?

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On June 5, 2020, President Trump signed into law the Paycheck Protection Program Flexibility Act of 2020 (PPPFA).  The PPPFA provides flexibility to borrowers attempting to maximize the benefits provided by the Paycheck Protection Program (PPP) established under the CARES Act.

For existing PPP loans, the PPPFA provides the following:

  • Extends the period for PPP loans to December 31, 2020 (extended from June 30, 2020)
  • Extends the forgiveness covered period to the earlier of 24 weeks after the date of the loan (increased from eight weeks) or December 31, 2020
    • However, a borrower under an existing PPP loan can elect to use the eight-week period
  • Extends the rehire exemption date to December 31, 2020 (extended from June 30, 2020)
  • Adds exemptions to the forgiveness reductions due to workforce reductions if the borrower can in good faith document:
    • An inability to rehire employees and hire similarly qualified employees for unfilled positions on or before December 31, 2020; or
    • An inability to return to the same level of business activity as such business was operating on February 15, 2020 due to compliance with governmental restrictions imposed March 1, 2020 through December 31, 2020
  • Requires at least 60 percent of the forgiveness amount to be attributable to payroll costs (decreased from 75 percent) and allows up to 40 percent to be attributable to non-payroll costs (increased from 25 percent)
  • Extends the deferral period for payments of principal, interest and fees to the date on which the forgiveness amount is remitted to the lender
    • A borrower must apply for forgiveness within 10 months after the forgiveness covered period or the deferral period will end

For new PPP loans, the PPPFA provides for a minimum maturity term of five years.

The PPPFA also eliminates the CARES Act requirement that PPP borrowers that receive any loan forgiveness are ineligible for the employer payroll tax deferral under the CARES Act.

Some lawmakers have expressed an intent to seek further technical revisions and clarifications to the PPPFA in the coming weeks, so further changes may be forthcoming. The SBA’s recently-issued Loan Forgiveness Application Form and Loan Forgiveness Interim Final Rules will likely be amended to account for the new deadlines and extended covered period under the PPPFA. Borrowers who choose to stay with the current 8 week covered period may be able to use the current Loan Forgiveness Application but should keep an eye out for any revised forms and instructions from the SBA and Treasury Department.

Mercadien’s COVID-19 Task Force can help you prepare the required loan calculations, compile the necessary documentation, complete and submit the forgiveness application and answer your questions about the PPP, PPPFA and other relief options. We’re also available to assist you in evaluating your budget and cash flow needs, working as an advisor and sounding board to help you manage your way through the upcoming months. Complete the COVID-19 Assistance Request form on our website or contact Frank Pina, CPA at 609-689-2319 or to get started.

DISCLAIMER: This advisory resource is for general information purposes only. It does not constitute business or tax advice, and may not be used and relied upon as a substitute for business or tax advice regarding a specific issue or problem. Advice should be obtained from a qualified accountant, tax practitioner or attorney licensed to practice in the jurisdiction where that advice is sought.