The U.S. Senate passed the House version of Paycheck Protection Program (PPP). The President is expected to sign the legislation.
Here are the changes to the PPP:
- Increases the time period for usage from 8 weeks to 24 weeks;
- Reduces the amount to be spent on payroll from 75% to 60%. However, if a business does not use at least 60% of the funds on payroll, none of the loan will be forgiven. Currently, a borrower is required to reduce the amount eligible for forgiveness if less than 75% of eligible funds are used for payroll costs, but forgiveness isn’t eliminated if the 75% threshold isn’t met. Senators Marco Rubio and Susan Collins indicated that technical tweaks could be made to the bill to restore the sliding scale;
- Allows recipients of PPP loans to also defer their payroll taxes;
- Allows small businesses full loan forgiveness without regard to rehiring all full-time employees lost due to the pandemic, as long as the business can demonstrate an inability to operate at the same level it did prior to February 15, 2020;
- Increases the time period to apply for a loan from June 30, 2020 to Dec 31, 2020; and
- Increases the repayment timeframe from 2 years to 5 years with interest unchanged at 1%.
Forgiveness is a detail-oriented process to present to the lender, and will require a business to demonstrate how the money was spent via underlying supporting source documentation, such as payroll tax returns or registers, as well as invoices. Nothing in the proposed legislation changes this aspect of forgiveness.
There continues to be many unanswered questions, we encourage each of you to review your process and documentation. If you require assistance, please call us at (973) 301-2300, we’re here to help.