PPP Information from FMA

June 5, 2020

Source:  FMA, 6/3

Last night, Congress approved the Paycheck Protection Program Flexibility Act (H.R. 7010). This legislation is expected to be signed into law during the next few days with new guidance from the SBA soon to follow. The Act is meant to make the original program more flexible for nonprofits and small businesses when it comes to how and when you can spend your PPP loan funds.

We are revising our tools to help you understand the impact of this new legislation on your organization, but, in the meantime, we wanted to share the updates as we understand them:
  • Your organization will now have until December 31, 2020 to spend the PPP loan you received on allowable expenses.
  • For forgiveness, the covered period is now 24 weeks, increasing from 8 weeks. You now have more time to spend funds that could be forgiven. The covered period cannot end any later than December 31, 2020.  If you already received a PPP loan, you still have the option of continuing to use the 8-week covered period.
  • Your organization now has, effectively, up to 10 months from the end of your chosen covered period to apply for forgiveness.
  • As written, and pending further guidance, you must use at least 60% of your total loan amount for payroll costs in order to qualify for forgiveness. This means you can now get up to 40% of the loan forgiven based on what you spend on non-payroll costs, such as rent, mortgage interest, and utilities. This is an increase from 25% in the original act.    
  • Under the “Safe Harbor” provisions, you will now have until December 31, 2020, rather than June 30th, to rehire employees (either the same or similarly qualified) and restore salaries back to their February 15, 2020 levels to avoid getting penalized on your forgiveness amount.
  • There are also several new exceptions to the rules regarding proportional reduction of forgiveness which are related to (1) inability to rehire or replace employees in certain circumstances and/or (2) inability, due to compliance with public health requirements, to return to prior levels of business activity.
  • The loan term will move from being a two-year loan to a five-year loan for any new loans. If you already have a PPP loan, you can work with your lender to mutually agree to modify the term to 5 years. This is relevant for you if you expect, even with the new provisions, that you will not get the entire loan forgiven.
  • Deferral of payment of the loan is extended until the amount of forgiveness is established.
  • To help with cash flow, organizations who received PPP forgiveness can also defer payroll taxes, which was previously prohibited.