In response to criticisms regarding the Paycheck Protection Program, the federal government features and passed the PPP Flexibility Act of 2022. This amendment aims to ease some concerns concerning the business aid program by extending payment dates and allowing wider use of the funds.
The bipartisan bill was passed by the Senate without objection on June 3 after it flew through the House a few days prior having a 417-1 vote. On June 5, obama signed the balance into law. The SBA and Treasury must interpret and implement the new rules for business owners who received loans via the program.
Lawmakers introduced the PPP underneath the CARES Act in March as a way to help businesses financially hurt through the COVID-19 pandemic. However, the program included what some business people and small business advocates considered stringent requirements — such as businesses having to use 75% of the loans on their own payroll — spurring Congress to introduce the Flexibility Act.
Let’s have a look below at exactly what the PPP Flexibility Act changes — and what it doesn't — as well as the way it might impact your business.
New PPP Forgiveness Rules
The PPP Flexibility Act, also dubbed H.R.7010, can be viewed entirely on Congress’s website.
Here’s a look at several highlights of the way it updates PPP rules:
- Borrowers now only need to use a the least 60% of their loan on payroll to qualify for forgiveness. The other 40% can be spent on other business expenses, which covers mortgage interest, utilities, and rent. Previously, the PPP required that a minimum of 75% of the loan was allocated to payroll, while only 25% was available for other uses.
- Borrowers are in possession of as much as 24 months or until December 31, 2022 (whichever is first), to make use of their funds. There was an eight-week requirement before the Flexibility Act’s passage.
- Businesses must rehire employees prior to the end of 2022 for full forgiveness. Previously, workers needed to be rehired by June 30, 2022.
- Businesses that neglect to rehire employees by December 31, 2022, can avoid the penalty by meeting 1 of 2 “good faith” requirements: An inability to rehire those who were employees last month 15, 2022/an wherewithal to hire similarly qualified individuals for empty positions by December 31, 2022, or perhaps an wherewithal to go back to the same degree of business activity the business functioned at on/before February 15, 2022.
- Borrowers who receive PPP loans following the Flexibility Act’s enactment date have 5 years to settle non-forgiven loans. Loans made before the Flexibility Act have only two years. The very first repayment could be deferred until six months after the SBA makes a determination on the loan’s forgiveness.
- Borrowers must make an application for loan forgiveness within 10 months after their covered period ends.
- Employers are now able to get the deferral of payroll taxes included in the CARES Act Section 2302, even when they have received PPP loan forgiveness.
PPP Flexibility Act Criticisms
Critics have noted the PPP Flexibility Act does not address all the concerns associated with the program. Among some remaining questions include doubts about the earliest date borrowers can start applying for forgiveness as well as issues over the uncertainty concerning the 60% payroll threshold. The brand new bill also hasn’t changed the PPP’s new applicant deadline of June 30, 2022.
Such qualms resulted in hesitation in the Senate within the bill’s passage. For example, Sen. Susan Collins, R-Maine, worried that wording within the Flexibility Act implied borrowers might not receive any forgiveness when they fail to spend 60% of the loan on their own payroll. She called such a strict limit a potential forgiveness “cliff” that differed in the PPP’s original ruling of proportional loan forgiveness if the payroll threshold isn't met.
However, the SBA and Treasury designed a joint statement on June 8, indicating borrowers who neglect to use 60% on payroll would remain eligible for proportional loan forgiveness. This interpretation is in line using the initial PPP rules and nixes any possible forgiveness cliff.
Other objections originated from Sen. Rod Johnson, R-Wisc., who penned a Wall Street Journal opinion piece arguing for “reforms that will prevent future funds from flowing to organizations that don’t need them.”
On surface of those criticisms, the PPP itself remains an elaborate beast. Besides the fact that the program proved to be a chaotic disaster when it came to approving applicants and shipping out loans, business people may have a problem with making repayments and receiving forgiveness. Without further action from Congress — be it scraping this program altogether for any more effective option or making significant tweaks to the current program — we may see some deep economic woes later on.
Is It Time and energy to Obtain a PPP Loan?
If your business’s bank account is struggling and also you haven’t searched for financial relief, you may be wondering if it’s time to obtain a PPP loan. These new rules will make it easier to both obtain a loan and provide your company more freedom to use its loan. As such, it could be a great time for businesses previously uncertain about PPP forgiveness guidelines or worried about how funds might be utilized.
On top of that, you may still find lots of PPP funds left within the tank. Based on recent numbers in the SBA, there's over $120 billion in funding left to distribute by May 30. With only south of $660 billion designated for that PPP in two rounds of funding, there should be plenty for everyone for that remaining businesses that need monetary aid.
Keep in your mind the new applicant deadline for PPP loans remains June 30. As outlined inside a bipartisan letter from several Congress members, “the SBA and participating
lenders stop accepting and approving applications for PPP loans” on that date despite some initial confusion following the bill passed the home that the new applicant date could be extended 'till the end of 2022. Which means you’ll need to decide about applying relatively quickly — it’s unclear when the program’s application date can get extended later on.
Of course, known only to you if it’s the right time for you to obtain a loan — watch is in another situation, and also the pandemic only complicates things. To assist keep, visit our guide to PPP loans. You may also take a look at ’s coronavirus hub for additional pandemic-related resources.
