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3 minute read

Latest changes to PPP make it easier for employers to receive loans

what to know about the paycheck protection program now
Alyssa Pedrick
by Alyssa Pedrick
July 23, 2020
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There’s good news for those who missed out on a loan from the Paycheck Protection Program (PPP) the first time around: The program has been extended for eligible businesses, with key updates designed to fix some of the initial kinks that plagued the original plan.

The PPP was created by the Trump administration to provide small businesses with loans as financial relief during the coronavirus pandemic.

When the PPP launched, it was criticized for its vague language and rigid rules that dictated how and when businesses could use the money. The original program, established by the CARES Act, gave funds to select businesses that had to be used within eight months. Plus, 75% of the loan had to be used to cover payroll. The unforgiven portion of the loan had to be repaid in two years.

Recently, an article from CNBC reported that over $500 billion was distributed across 4.6 million loans to various employers. However, many businesses couldn’t secure a loan, so these employers felt they were shortchanged and needed more help. You may have been among them.

After many revisions to the PPP, most of employers’ concerns have been addressed, and with about $130 billion of PPP loans still unclaimed by businesses, Congress extended the deadline, and the government is accepting new applications until Aug. 8, 2020.

New law adds flexibility for PPP

To make it easier for businesses to claim their share of this money, the House and Senate relaxed several PPP requirements by passing the Paycheck Protection Program Flexibility Act (PPPFA) in early June 2020.

One of the biggest changes implemented by the PPPFA was that only 60% of the money businesses receive from loans is now required to go to payroll expenses, instead of 75%. This change was designed to give employers the freedom to spend the funds on other important expenses, like rent or utilities, that may be more pressing than payroll.

How Not to Wreck Your Reconciliations

Another update put in place by the PPPFA is that businesses now have 24 weeks to spend the money they’re loaned, not eight weeks like before — giving them until the end of 2020.

This means employers now have more time to make decisions about how to spend the money, and it also allows those that may still be closed for business to spend funds after they reopen, when they might need the money more.

Loan forgiveness and more

As for loan forgiveness, under the PPPFA, employers don’t have to wait until the original six-month period passes to apply – they’re now able to do so after eight weeks. That way, businesses can secure forgiveness sooner and make financial decisions accordingly.

Additionally, the repayment term for PPP loans was extended from two years to five years. This added flexibility may be crucial to struggling businesses that’ll need time to recover.

The PPPFA also gives employers more time to rehire laid off or furloughed employees, which is required for loan forgiveness. While the original rehire deadline was June 30, 2020, it’s now been extended until Dec. 31, 2020. There’s also relief available for businesses that can’t restore their workforce to previous levels due to the impact of the coronavirus.

In the end, despite a rocky start to the PPP, many agree that passing the PPPFA is a step in the right direction, and a sign that the government is listening to the concerns of small businesses around the country.

Additional info available

Loans are still available for interested employers to claim right now. To learn more about what the PPPFA means for your company, how to determine if you’re eligible for a loan and what actions you should be taking in light of these revisions to the PPP, attend the workshop “Greater Relief For Employers Under New PPP Flexibility Act,” on demand at your convenience.

The workshop is hosted by Pamela Fagan, president of Audit Business Services Inc. and a certified member of the Society for Human Resource Management (SHRM) and the American Payroll Association (APA).

Alyssa Pedrick
Alyssa Pedrick
Alyssa, a member of the Resourceful Finance Pro staff, has written extensively on business and finance for several years. She has produced content for accounts payable professionals and finance executives and has developed whitepapers and infographics for the finance and accounting industry.

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