The President signed the Paycheck Protection Program Flexibility Act (PPPFA) into law on June 5, which is geared towards small businesses, including auto glass companies, who qualified for the Paycheck Protection Program (PPP). The House passed the PPPFA on May 27, 2020, the Senate followed with a unanimous vote on June 3, 2020.
The new law addresses several points in the original PPP, which was created under the Coronavirus Aid, Relief, and Economic Security (CARES) Act. First, borrowers now have more time to spend the loan proceeds. Before the PPPFA, spending had to occur within 8 weeks of receiving the loan proceeds. Now borrowers have 24 weeks after the origination of the loan, or until December 31, 2020. Employers can also continue to apply for the PPP loan until June 30, 2020.
Second, there is now a reduction in the amount that needs to go to payroll costs in order to qualify for forgiveness. Now, after the PPPFA, 60% of the loan proceeds must be spent on payroll costs. This is down from 75%, which means that forgivable non-payroll expenses (such as rent, utility payments and mortgage interest) can be as high as 40% of spending, up from 25%.
The new Act also:
- Lengthens the loan maturity date from two to five years;
- Ensures full access to payroll tax deferment for businesses that take PPP loans;
- Extends the loan forgiveness rehire date to December 31, 2020;
- Creates a safe harbor for businesses that make a good-faith effort to hire or re-hire qualified employees; and
- Allows borrowers who received PPP loans prior to enactment to choose for the covered period of their loan to either last eight weeks or 24 weeks from origination.