On June 5, President Donald Trump signed the Paycheck Protection Program Flexibility Act of 2020 (PPPFA). This measure gives business owners more time and flexibility to use loan money and still have it forgiven as part of the Paycheck Protection Program (PPP).
The law will give small businesses more time to use emergency loans under the PPP program by extending the eight-week period in which they must use the money to qualify for loan forgiveness to 24 weeks or December 31, 2020 - whichever is earlier. This flexibility is designed to make it easier for businesses to reach full, or almost full, forgiveness – something that was very difficult for New Jersey-based nonessential businesses that received a PPP loan, but have been closed making it impossible to use the funds in eight weeks.
Additionally, the PPPFA will allow the business to use at least 60 percent of the loan proceeds on payroll related costs and up to 40 percent of the proceeds may be used for the other qualified costs (i.e. rent, utilities including telephone, mortgage interest, etc.). This change overrides the previous requirement that at least 75 percent of the loan proceeds are to be used for payroll related costs and that the other qualified costs were further limited to 25 percent of payroll related costs.
New borrowers now have five years to repay the loan instead of two with the interest rate holding at one percent. Existing PPP loans can be extended up to five years if the lender and business agree to those terms. PPPFA allows businesses that took a PPP loan to also delay payment of their payroll taxes, which was prohibited under the CARES Act.
Please reach out to Hilary Chebra, Manager, Government Affairs, at email@example.com
if you have any questions.
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