Important PPP Update
Good morning my Concierge Family,
We have some exciting news. Last week the House of Representatives passed a bill updating the PPP
program. Yesterday, the U.S. Senate passed the House version of Paycheck Protection Flexibility
Act, H.R. 7010, tripling the time allotted for small businesses and other PPP loan recipients to spend the funds and still qualify for forgiveness of the loans. The bill passed in a unanimous vote. Among the key provisions is a change in the threshold for the amount of PPP funds required to be spent on payroll costs to qualify for forgiveness to 60% of the loan amount. The bill moves the June 30 deadline for spending the PPP funds to Dec. 31 to accommodate the new 24-week window.
The Senate approval sends the House bill, to President Donald Trump, who is expected to sign it.
Following is a summary of the legislation’s main points:
● Current PPP borrowers can choose to extend the eight-week period to 24 weeks, or they can keep the original eight-week period. This flexibility is designed to make it easier for more borrowers to reach full, or almost full, forgiveness.
● New PPP borrowers will have a 24-week covered period, but the covered period can’t extend beyond Dec. 31, 2020.
● The payroll expenditure requirement drops to 60% from 75% but is now a cliff, meaning that
borrowers must spend at least 60% on payroll or none of the loans will be forgiven.
● Borrowers can use the 24-week period to restore their workforce levels and wages to the pre-pandemic levels required for full forgiveness. This must be done by Dec. 31, a change from the previous deadline of June 30. The legislation includes two new exceptions allowing borrowers to achieve full PPP loan forgiveness even if they don’t fully restore their workforce. The amount of loan forgiveness will NOT be reduced when a borrower experiences a loss of FTEs if the borrower, in good faith, is able to document any of the below:
○ There was an inability to rehire individuals who were employees of the eligible recipient on
○ There was an inability to hire similarly qualified employees for unfilled positions on or
before December 31, 2020, or,
○ There was an inability to return to the same level of business activity as such business was
operating at before February 15th due to compliance with requirements established or guidance
issued by the Secretary of Health and Human Services, the Director of the Centers for Disease
Control and Prevention, or the Occupational Safety and Health Administration during the period
beginning on March 21, 2020, and ending December 31, 2020, related to the maintenance of standards
for sanitation, social distancing, or any other worker or customer safety requirement related to
COVID– 19. This is the BIG ONE. It basically provides that if the world is such that on December
31st, restaurants, and bars, for example, are unable to fully open due to government orders, any loss in FTEs resulting from such restrictions should NOT be taken into account in computing the required reduction in the forgivable amount.
● The maximum amount that can be paid to any one employee that will be forgiven is capped at an annualized salary of $100,00. For a 24-week covered period, this limit will be reached once an employee receives $46,153 in cash compensation. H.R. 7010 does not make that clear, but here’s to hoping that soon-to-be-released guidance does.
● New borrowers now have five years to repay the loan instead of two. Existing PPP loans can be extended up to 5 years if the lender and borrower agree. The interest rate remains at 1%.
● First payments on the loan were originally deferred for six months. Under H.R. 7010, the
deferral of loan payments is granted until the date the lender receives the forgiveness amount from
the SBA, which in most cases will be significantly longer.
● The bill allows businesses that took a PPP loan to also delay payment of their payroll taxes,
which was prohibited under the CARES Act.
I know this is a lot of information to take in. As always we are here for you to answer any comments, questions, or concerns. We are just a phone call email or text away and remember we are all in this together and will get out of this together.
Have an amazing day everyone!