NACOGDOCHES, Texas (KTRE) - U.S. Congress has successfully passed revisions pertaining to the Paycheck Protection Program (PPP) funding to the nation’s businesses to help expenses and loss of income due to the coronavirus pandemic.
The PPP Flexibility Act, passed by the entire Senate Tuesday night, is intended to help small business owners, including David and Teresa Darby of Nacogdoches. They’re entering the ‘forgiveness phase’ of funding they received through the Paycheck Protection Plan.
"We have been using the funding. Actually, our 8 weeks is up this month,” said Teresa.
Darby was among the Nacogdoches Chamber members who listened with personal interest to a regional Congressional and Public Affairs director for the U.S. Chamber of Commerce. John Gonzales said the law will help borrowers, like the Darbys, obtain loan forgiveness.
"That bill extends the loan term from 8 weeks to 24 weeks, lowers the percentage of loan proceeds that must be used on payroll from 75 to 60 and then extends the PPP from June 30 to the end of the year, Dec. 30 of this year."
Darby is pleased.
“So, the fact that we have this longer-term it’s helpful, if I’ll need it.”
Darby was among business owners who actually received more money than what was requested.
"So now I can continue to finish using it and know that I'll still be able to use it specifically and be great."
Gonzales says Congress will spend June revising this time, the CARES act.
“It will no doubt include liability protection or provide safe harbor for health care workers, business owners, and employees from lawsuits pertaining to the COVID-19 outbreak,” explained Gonzales.
The Public Affairs and Congressional specialist expects it to be a bi-partisan effort.
Following is a summary of the legislation’s main points compiled by the AICPA:
- Current PPP borrowers can choose to extend the eight-week period to 24 weeks, or they can keep the original eight-week period. New PPP borrowers will have a 24-week covered period, but the covered period can’t extend beyond Dec. 31, 2020. This flexibility is designed to make it easier for more borrowers to reach full, or almost full, forgiveness.
- Under the language in the House bill, the payroll expenditure requirement drops to 60% from 75% but is now a cliff, meaning that borrowers must spend at least 60% on payroll or none of the loans will be forgiven. Currently, a borrower is required to reduce the amount eligible for forgiveness if less than 75% of eligible funds are used for payroll costs, but forgiveness isn’t eliminated if the 75% threshold isn’t met. Rep. Chip Roy (Texas), who co-sponsored the bill in the House, said in a House speech that the bill intended the sliding scale to remain in effect at 60%. Senators Marco Rubio and Susan Collins indicated that technical tweaks could be made to the bill to restore the sliding scale.
- Borrowers can use the 24-week period to restore their workforce levels and wages to the pre-pandemic levels required for full forgiveness. This must be done by Dec. 31, a change from the previous deadline of June 30.
- The legislation includes two new exceptions allowing borrowers to achieve full PPP loan forgiveness even if they don’t fully restore their workforce. Previous guidance already allowed borrowers to exclude from those calculations employees who turned down good-faith offers to be rehired at the same hours and wages as before the pandemic. The new bill allows borrowers to adjust because they could not find qualified employees or were unable to restore business operations to Feb. 15, 2020, levels due to COVID-19 related operating restrictions.
- New borrowers now have five years to repay the loan instead of two. Existing PPP loans can be extended up to 5 years if the lender and borrower agree. The interest rate remains at 1%.
- The bill allows businesses that took a PPP loan to also delay payment of their payroll taxes, which was prohibited under the CARES Act.