House & Senate Pass Bill to Modify PPP Loan Program

House & Senate Pass Bill to Modify PPP Loan Program June 4, 2020

On June 3rd, the Senate passed the House bill to modify the PPP Loan Program.  Highlights:

  1. Borrowers can choose either an 8-week or a 24-week covered period.  The flexibility of the additional 16 weeks is intended to allow more borrowers to qualify for 100% loan forgiveness.  (It will be interesting to see if the 24-week period also means an increase of the per-employee eligible compensation limit from $15,385 to $46,154.)
  2. The payroll cost requirement was lowered from 75% of the forgiveness amount to 60% of the forgiveness amount, allowing more nonpayroll costs to qualify.  However, the new bill also introduces a cliff that would prevent loan forgiveness unless 60% or more of the loan was spent on payroll.  It is unclear if this new cliff provision was a drafting error, as some members of Congress have already asked the SBA and Treasury if the cliff issue could be addressed favorably in subsequent regulations and guidance.
  3. Borrowers have until December 31st, previously June 30th, to restore workforce and wages to pre-pandemic levels and not have it negatively affect the forgiveness calculation.  Exceptions apply for an inability to rehire individuals who were employees on February 15, 2020, an inability to hire similarly qualified individuals for unfilled positions, and an inability to return to the same level of business activity due to government requirements regarding sanitation, social distancing, etc.
  4. The minimum maturity for new loans has been increased from 2 years to 5 years.
  5. Borrowers can now also participate in the CARES Act provision allowing them to delay the payment of certain payroll taxes.

Assuming the bill is signed by President Trump, we can expect the SBA and Treasury to issue additional guidance on this new bill in the coming days and weeks.

Bill text is attached here.

The Whitinger team remains available to advise you throughout this situation. Please do not hesitate to reach out if you have questions or would like to discuss this new guidance.

We are here and ready to help.