Modifying the Payroll Protection Program: What You Need to Know

In the past week, the Senate passed the House’s bill that effectively modifies the Payroll Protection Program (PPP), and it was signed by the President on June 5, 2020. We originally covered the ins and outs of the PPP in our blog post here when the program was first signed into effect in April 2020. The new changes made to the program are intended to make it easier for borrowers to qualify for loan forgiveness, and ultimately extend some of the deadlines for qualification requirements to increase flexibility for small business owners. Let’s review a few of the changes that were made.

Extended Timeline for Spending Your Loan

Originally, borrowers only had 8 weeks to spend the total funds from their loan. Now, that timeline has been extended to 24 weeks, or until December 31st. This gives businesses more time to rehire employees, open their doors in accordance with CDC guidelines, or order necessary supplies. 

Change in Maturity Date

Previously, PPP loans that weren’t forgiven had a minimum maturity date of two years. Now, revisions to PPP have extended this minimum maturity period to five years. The maximum maturity date is still 10 years.

More Flexibility in How You Spend The Funds

Originally, PPP loans required that 75% of the total loan amount be put toward payroll. The adjustments in this bill lower the total required amount to 60%. This will allow small business owners to put more funds toward other necessary expenses. 

Removing Limits Associated with Rehiring

Business owners now have until December 31st to rehire their employees, or new employees, and ramp up the business to pre-quarantine activity. 

Extended Tax Credits

This bill gives the flexibility to allow business owners who take a PPP loan to also qualify for a tax credit that essentially defers payroll taxes. This is one element of the PPP that hasn’t been fully ironed-out, and many small business experts are pushing for further clarification on how the loan will impact payroll taxes for small businesses.

Have Questions?

The Payroll Protection Program has many complicated features that could potentially benefit your business. Please remember that, over the next few months, there are still details being ironed out within the program which could cause future changes. 

It may be wise to consult with a professional to ensure you’re taking the appropriate steps to qualify for loan forgiveness. Reach out! We’re here to help you navigate these uncertain times.

Wood Smith Advisors, a woman-owned Registered Investment Advisor (RIA), is a fee-only financial services firm that partners with its clients to simplify their financial lives. We focus on women, entrepreneurs, and individuals with complex financial situations, providing objective and competent advice, education and services to help them develop and build their businesses and reach their financial goals. We can be reached by clicking here.

"Finance Made Simple" blog posts are intended for educational purposes and not for specific advice. Each person’s situation is different. Consult your financial advisor for advice relating to topics discussed.

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