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PPP rehire date extended with additional flexibility for borrowers

Staff Report //June 11, 2020//

PPP rehire date extended with additional flexibility for borrowers

Staff Report //June 11, 2020//

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Late last week, the Paycheck Protection Program Flexibility Act was signed into law through a bipartisan effort to address concerns raised by small-business owners about rehiring requirements, repayment and uses for the loan.

June 30 will now be the last date that a PPP application can be approved instead of the last date for businesses to rehire employees to ensure loan forgiveness, which has now been extended to Dec. 31.

“This bill will provide businesses with more time and flexibility to keep their employees on the payroll and ensure their continued operations as we safely reopen our country,” Steven Mnuchin, secretary of the U.S. Treasury and Jovita Carranza, administrator of the U.S. Small Business Administration, said in a recent news release.

Under the program’s modifications, employers are now able to use a minimum of 60% of the loan for payroll costs as opposed to the previous 75% minimum, according to the release. Borrowers who use more than 40% of the loan for utilities or other non-payroll costs could be eligible for partial loan forgiveness if 60% of the amount forgiven goes to payroll costs.

Borrowers will also have a wider berth in terms of loan forgiveness. The act extends the loan forgiveness period from eight weeks after the day the funding is disbursed to 24 weeks, while existing borrowers can use an eight-week covered period, the release said.

The act also offers a “safe harbor” for loan forgiveness reduction for businesses who were unable to bring back employees they had furloughed or laid off during the pandemic or hire new similarly qualified employees by Dec. 31, as opposed to the previous June 30 rehire date.

Businesses who were unable to return to a pre-pandemic payroll levels due to business closure or other inhibitions in compliance with COVID-19 guidelines from the Department of Health and Human Services, Centers for Disease Control and Prevention, or the Occupational Safety and Health Administration will also be offered some leniency for loan forgiveness.

Instead of a two-year maturity limit, loans approved by the SBA on or after June 5 will have a five-year maturity period. The act also extends the borrower’s payment deferral period to the date the lender receives the borrower’s loan forgiveness amount from the SBA, according to the release.

In the release, Mnuchin and Carranza praised initiative’s bipartisan collaboration and said the aid will protect 50 million jobs across the country via 4.5 million small-business loans.

“We look forward to getting the American people back to work as quickly as possible,” Mnuchin and Carranza said in the statement.