FLORIDA SMALL BUSINESS DEVELOPMENT CENTER AT IRSC
CHANGES IN PPP DESIGNED TO MAKE IT MORE
ATTRACTIVE TO SMALL BUSINESS OWNERS
TCBusiness.com 35
The president has signed the Paycheck
Protection Program Flexibility Act of 2020.
This law may make PPP loans more attractive
to small businesses. Here are seven of
the main ways it may help your business:
1. More money for nonpayroll
expenses
Although not a provision of the CARES
Act, current guidance from Treasury and
the SBA limits forgiveness for nonpayroll
expenses to no more than 25% of the
forgiven amount. At least 75% of PPP
loan proceeds must go toward payroll
and payroll-related costs to qualify for full
forgiveness.
What will change: To qualify for forgiveness,
the Paycheck Protection Program
Flexibility Act allows up to 40 percent
of PPP funds may be spent on certain
nonpayroll expenses while at least 60% of
the PPP loan proceeds must be spent on
payroll and payroll-related expenses.
Note: It appears that the way the legislation
is written, spending less than 60
percent of PPP funds on payroll won’t simply
reduce forgiveness, but may eliminate
it. Further guidance will be needed.
The types of nonpayroll expenses that
may qualify for forgiveness don’t change.
They are still limited to business rent,
mortgage interest and utilities for services
or obligations in effect by Feb. 15.
2. Triple the time to use your loan
The covered period is the eight weeks
after the loan is disbursed and ends June
30. Based on guidance from the SBA and
Treasury, business owners who want to
qualify for forgiveness must spend their
PPP funds during the eight weeks after
the loan is disbursed or the alternative
covered period, which is the eight-week
period that begins on the first day of their
first pay period following their PPP loan
disbursement date.
What will change: The covered period
will be the period beginning on the date
of the origination of a covered loan and
ending the earlier of the date that is 24
weeks after such date of origination; or
Dec. 31, 2020. This essentially triples the
time during which the business owner can
spend PPP funds and apply for forgiveness
from eight to 24 weeks. Note that
business owners can still elect to stick
with the eight-week period for forgiveness
purposes.
3. Business owners can get PPP
and payroll tax deferral
The CARES Act allows employers to
defer the deposit and payment of the
employer’s share of Social Security taxes
and self-employed individuals to defer
payment of certain self-employment
taxes. Currently, employers that received
a Paycheck Protection Program loan may
not defer the deposit and payment of the
employer’s share of Social Security tax
that is otherwise due after the employer
receives a decision from the lender that
the loan was forgiven.
What will change: This prohibition will
be removed. This will give employers and
self-employed individuals full access to
both PPP and payroll tax deferral.
4. Extends the rehiring time period
The CARES Act contains a provision that
generally allows employers who reduced
employee headcount before Feb. 15 to
restore similar employment levels by June
30 and avoid a reduction in forgiveness.
What will change: The PPP Flexibility
Act allows this rehiring exemption to be
extended to Dec. 31, 2020.
5. Provides more flexibility for COVID
19 impacted businesses
Employers who aren’t able to bring employees
back to work due to stay-at-home
orders or other restrictions generally still
have to pay employees in order to avoid a
reduction in forgiveness.
What will change: Employers may be
exempted from a reduction for forgiveness
if they are able to document an inability
to return to the same level of business
activity as such business was operating
at before Feb. 15 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 1 and ending Dec. 31, 2020, related
to the maintenance of standards for
sanitation, social distancing, or any other
worker or customer safety requirement
related to COVID-19.
6. Five-year loans
The CARES Act established a minimum
loan maturity of 10 years but subsequent
Treasury and SBDC guidance has limited
the length of a PPP loan repayment period
to two years.
What will change: The maximum loan
term would be five years for any loan originated
on or after the date this legislation
is enacted, but nothing would prohibit
lenders and borrowers from mutually
agreeing to a similar repayment period
for PPP loans made prior to the date this
legislation becomes law.
7. Payments deferred until forgiveness
period
Under the CARES Act, payments on PPP
loans are deferred for six months to one
year, though subsequent guidance from
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Michael Bernard’s consulting experience
comes from his work with several international
accounting firms in their management
consulting departments working
with Fortune 500 companies throughout
the United States. He has also worked for
several local and regional accounting firms
as both a manager and principle in charge
of their consulting operations in the South
Florida area before opening his own management
consulting company in Miami, FL.
BY GERRI DETWEILER
/TCBusiness.com