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Richard Dellefave, CPA / Principal in the RINA San Francisco office.
Richard DelleFaveCPA / Principalview bio

Howard Zangwill, CPA, Managing Director of Audit and Accounting in the Oakland office.
Howard ZangwillCPA / Managing Director of Audit and Accountingview bio

New Legislation Provides More Flexibility to PPP Loan Recipients

6/4/2020

(updated June 11, 2020)

On June 5th, the President signed a Paycheck Protection Program (PPP) reform bill that will provide small businesses more flexibility in how they spend the federal loans they received.
 
The legislation – titled the Paycheck Protection Program Flexibility Act – makes several changes to the PPP, whose intention was to help small businesses keep employees on payroll after the pandemic forced them to close.
 
Initially, Congress put $350 billion into the small business loan program, but the money ran out quickly. So, lawmakers added an additional $310 billion into the program. About $130 billion remains from the second round that Congress approved.
 
The push for revisions to the program comes as business owners have complained that the terms of use are overly restrictive and do not offer enough flexibility amid the crisis. Businesses – especially in the restaurant and hospitality industry, which are only recently getting the green light to reopen say they need more time to distribute pay.
 
Timing is urgent because the eight-week spending period began expiring last Friday for the first loan recipients after the Small Business Administration program opened April 3.
 
The legislation provides small businesses:

  • More time to use emergency loans under the program by extending the eight-week period in which they must use the money to qualify for loan forgiveness to 24 weeks or until the end of the year, whichever comes first.
  • More flexibility by changing the 75/25 rule, which requires fund recipients to use 75% for payroll costs and to limit other costs to no more than 25% for loan forgiveness eligibility. The new ratio would be at least 60% on payroll and no more than 40% on other costs. An important caveat is that the 60% is now all or nothing – if you don’t hit 60%, you get zero forgiveness.
     
  • An extension on the June 30th deadline to rehire workers to December 31st.
     
  • An extension on the timeline for repaying loans to five years instead of two, if the amount provided does not convert into a grant.
     
  • To defer payroll taxes if granted loan forgiveness. 

The President signed the bill into law on June 5, 2020.

If you have any questions or concerns, please reach out to your RINA accountant, or email our response team to discuss the help you need

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