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What the Paycheck Protection Program Flexibility Act Means for SMBs

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The new Paycheck Protection Program (PPP) Flexibility Act was signed into law by the President on June 5th. Now that small businesses have more flexibility to use PPP loans, the SBA and US Treasury is expected to update guidance regulations and forgiveness application parameters to improve functionality under the program.
Forgiveness Period Now Extended to 24 Weeks
The new legislation allows an 8-week extension for small businesses to use their PPP emergency loans. Now the funds must be used within 24 weeks to qualify for loan forgiveness.
Under the new law, 8 weeks to use funds has been extended to 24 weeks or December 31, 2020, whichever comes first. This improvement has come due impart to a large number of small business fund disbursements received only recently. Many have been unable to resume normal business operations because of legal or health-related reasons. Extending the covered period to 24 weeks will greatly improve small business owners' ability to use their PPP funds and bring back their workforce.
 
Cost Rule Has Been Reduced to 60%
The bill gives small businesses added flexibility by changing the 75/25 rule, which requires recipients of PPP funds under the program to use three-quarters of the money for payroll costs and to limit other costs to no more than 25% in order to be eligible for loan forgiveness. The new ratio would be at least 60% on payroll and no more than 40% on other costs.

This rule required forgiveness requests for a PPP loan to be comprised of at least 75 percent payroll costs, while the other 25 percent can be spent and used on other qualifying forgiveness purposes such as a mortgage, rent and utilities. By reducing the payroll cost requirement to 60 percent, small business owners will be eligible to have more of their PPP funds forgiven. This should alleviate issues for those small businesses that have a higher rent or mortgage payment and were finding it difficult to use PPP funds within the 8 week period.
 
This is great news for many small businesses. The additional 16 weeks allows for more payroll cycles and should result in more PPP funds being forgiven.  We’re helping our clients navigate the loan application process and will be their front line navigating the ongoing forecasting and analysis process, as well as ensuring pristine records are maintained to support their loan forgiveness over this period. 
 
Get PPP Loan Forgiveness Checklist
 
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