President Donald Trump signed the new law relaxing the repayment rules under the Paycheck Protection Program (PPP) on Friday.
The PPP is the US government’s main stimulus measure to combat the economic impact of the COVID-19 pandemic. It provides forgivable loans to businesses to cover their payroll and other expenses. In order to qualify for the loan, these applicant businesses must certify that the loan is necessary due to economic uncertainty. Because the loan is only forgivable if applicants meet certain criteria, many businesses have previously expressed concern that they would not be able to comply.
The Paycheck Protection Program Flexibility Act (PPPFA), which seeks to relax the repayability rules, passed in the House on May 27 and received Senate approval on June 3.
Now that the law is enacted, the following changes will be put in place:
- The amount of the loan that needs to be spent on payroll is reduced from 75% to 60%,
- Businesses now have 24 weeks to spend the loan they receive, rather than eight weeks,
- The deadline to rehire workers by June 30 is pushed back to Dec. 31,
- A business can still receive forgiveness on payroll amounts if it: Is unable to rehire an employee on or before Feb. 15; Is able to demonstrate an inability to hire similarly qualified employees on or before Dec. 31; or Is able to demonstrate an inability to return to the same level of business activity as prior to Feb. 15, 2020, and
- The repayment term is extended from two to five years.
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