House of Representatives hopes to create more flexibility for Paycheck Protection Program
A new bill, which significantly relaxes the terms and restrictions for the Paycheck Protection Program (PPP), was overwhelmingly passed by the House of Representatives on Thursday, May 28. The legislation, titled the Paycheck Protection Program Flexibility Act (Act), is now on its way to the Senate for further consideration but it is unclear if the Act will receive the same bipartisan support from Senate leaders.
The PPP was initially created and funded by the $2.2 trillion CARES Act passed in March and further supplemented by an additional $320 billion in April after proving to be exceedingly popular. The Act seeks to relax requirements small businesses must follow to receive and use emergency funding under the PPP. The supporters of the Act hope to make access to and use of PPP funds more flexible by implementing the following new provisions.
- The new bill would change the PPP’s sunset date from June 30 to December 31.
- If approved, the Act would provide small businesses with more time to use PPP funding by extending the period in which businesses may qualify for loan forgiveness from eight weeks to 24 weeks.
- Businesses would no longer be forced to spend 75 percent of PPP funds on payroll in order for the loan to be forgiven. Instead, the legislation would lower the percentage of money required to be spent on payroll to 60 percent. This would allow small businesses to use up to 40 percent of the funds on other expenses, such as utilities and rent.
- The new legislation would also allow businesses that receive PPP funding to defer payroll taxes.
At this time it is unclear what version of the Act may pass through the Senate. The Senate creators of the original PPP offered their own revisions, including a 16-week time frame to repay the emergency loans and a provision that would allow small businesses to use loan funds to pay for other expenses including personal protective equipment and additional safety measures. Despite differing opinions on what the new provisions should look like, there seems to be an overall sense of urgency to make the PPP more accessible and useful to small businesses. This push comes during the ongoing battle to pass an additional $3 trillion relief package that will certainly face additional opposition.
McDonald Hopkins has a team of professionals dedicated to assisting businesses experiencing financial distress as a result of the coronavirus. Click here for a list of articles focused on providing legal and business solutions to the impact of the coronavirus on your business.