The President signed into law the Paycheck Protection Program Flexibility Act (PPPFA) which changes forgiveness terms for small businesses.
This new law includes the following changes:
1. Amount of loan needed for payroll changes to 60%
The PPPFA reduces the percentage of the loan to be spent on payroll from 75% to 60%, thus increasing the amount of funds available for qualified business expenses from 25% to 40%.
2. Time period to use funds extends to 24 weeks
Originally, businesses were required to spend loan proceeds in the 8 week period from the date funds were received. Now, businesses have been given 24 weeks but not to exceed December 31, 2020.
The PPPFA also does not require businesses to wait for the 24 weeks to apply for forgiveness. They can apply after eight weeks if preferred.
3. Deadline to rehire workers
The new law extends the rehire date to December 31,2020, and adds additional exceptions for a reduced head count. A business can still receive forgiveness on payroll amounts if it:
– Is unable to rehire an individual who was an employee on or before February 15, 2020.
– Is able to demonstrate an inability to hire similarly qualified employees before December 31, 2020.
– Is able to demonstrate an inability to return to the same level of business activity as such business was operating at prior to February 15, 2020.
4. Allowing for a five-year rather than a two-year maturity date for any unforgiven funds.
Philip L. Liberatore, CPA remains committed to providing you with important information that pertains to your success.