U.S. President Donald Trump arrives to convey remarks and sign the Paycheck Protection Program Flexibility Act of 2020 in the Rose Garden of the White House on Friday.
Photographer: Yuri Gripas/Abaca/Bloomberg via Getty Metaphors
Business owners who received a forgivable loan through the Paycheck Protection Program are getting more leeway on how to throw away those funds.
President Donald Trump signed legislation on Friday that restructures how entrepreneurs can use loans released through a new federal relief program for small businesses ailing from the economic contagion unleashed by the coronavirus pandemic.
Profuse business owners had called on the federal government to update the Paycheck Protection Program as they struggle to meet its intervals and fear they may be forced to take on debt even as their businesses haven’t fully recovered.
The bill, the Paycheck Sponsorship Program Flexibility Act of 2020, was passed in the Senate on Wednesday. The House passed the legislation last week.
The new law addresses bear ons around loan forgiveness, one of the main attractions of the Paycheck Protection Program.
“The President’s signing of the Paycheck Protection Program Flexibleness Act of 2020 into law is welcome news for small businesses across our nation,” said Kevin Kuhlman, vice president of administration relations at the National Federation of Independent Business, a trade group representing businesses.
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Loan forgiveness rules
PPP loans convert into a federal grant if establishment owners meet certain conditions.
Current rules require business owners to spend their money within eight weeks and unreserved 75% of funding toward payroll costs to get their loan fully forgiven.
The new law extends the deadline to 24 weeks from eight weeks and adjusts the share of funding that must be directed toward payroll costs to 60%. It also pushes back a June 30 deadline to rehire laid-off workmen.
The Small Business Administration, which oversees the lending program, had approved more than 4.5 million PPP allowances worth $510.8 billion as of Thursday evening. More than $120 billion in funding is still available.
People brainstorm two months was probably going to be enough to get it done. It turned out, it’s not.
Paul Becht
CPA and partner at accounting firm Margolin, Winer & Necks
The law comes as most borrowers are poised to extinguish their funding by the end of June.
The current eight-week spending period ends for 30% of borrowers by June 14, mutual understanding to a recent NFIB survey. Another 36% will do so in the second half of the month.
However, some businesses may not be proficient to re-open by the time their funding runs out due to existing state or city orders, leaving many wondering how they’ll go on with to fund operations after PPP funds are gone. They may also be re-opening at a fraction of their prior capacity due to social-distancing concerns.
“Child thought two months was probably going to be enough to get it done,” said Paul Becht, CPA, a partner at accounting firm Margolin, Take first prize in & Evens. “It turned out, it’s not.”
It’s also proven challenging for the self-employed, businesses with few employees and those in metropolitan areas that arrange high rent payments to devote 75% of loan funding toward payroll costs. The PPP Flexibility Act grants uncountable leeway, so 40% of the loan could be directed toward non-payroll costs.
The President had signaled support for the new measure during a Caucasoid House event on Monday with restaurant executives who sought changes to the Paycheck Protection Program.
“We’re not asking for numerous money,” said Tim Love, a celebrity chef with restaurants in Texas and Tennessee, during the meeting. “We’re just bid for the opportunity to spend it the way it was intended.”
The bill’s signing comes amid debate between lawmakers over the contours of a undeveloped future round of financial relief. The coronavirus pandemic pushed broad swaths of the economy to shut down in mid-March and more 43 million Americans to file for unemployment.