What the PPP Flexibility Act Means for Small Business Owners

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Late on Friday, June 5, President Trump officially signed the Paycheck Protection Program (PPP) Flexibility Act into law. The new law provided key concessions for borrowers to make the program more responsive to the conditions small businesses and their employees are facing during the COVID-19 crisis.

Then, on Wednesday, June 10, the Small Business Administration (SBA), working with the Department of Treasury, released their revised interpretation of the law in a new Interim Final Rule.

Breakdown of the latest PPP changes

Now that they’re official, here’s an overview of those key changes and how they could affect your small business:

  • Borrowers are now required to spend only 60% of their loan – a reduction from 75% – on eligible payroll expenses. 

  • The SBA confirmed that PPP loans will not be all-or-nothing forgiveness – partial forgiveness remains an option.

  • The forgiveness period has been extended from 8 weeks to 24 weeks or December 31, 2020, whichever is earlier. Borrowers who received their loans prior to the new law’s passage can still select an 8-week forgiveness period.

  • Borrowers will have 10 months of deferred payments beyond the end of the extended covered period. Then they will need to apply for forgiveness or principal and interest payments will be due.

  • The Safe Harbor exemption based on employee availability was formalized and now includes potential circumstances due to the “inability to return to the same level of business activity.”

  • Any new PPP loans – approved by the SBA on or after June 5 – will mature in 5 years now instead of 2 years. 

What should you do now?

To ensure you’re prepared to maximize your forgiveness eligibility when it’s time to apply, here are some actions you can take now.

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