The Paycheck Protection Program, also known as the PPP, is an incredible stimulus program for small businesses. And now, there are five major changes to the PPP that you need to know about.
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The Paycheck Protection Program was created out of the CARES Act to help small businesses. The PPP gives forgivable loans to small businesses equal to 2.5 times a business’ monthly payroll.
In order to get your PPP loan forgiven, the PPP funds must be spent on payroll, rent, mortgage expenses, or utilities.
The new PPP changes are as follows:
1. Previously, the PPP required borrowers to spend at least 75% of their PPP funds on payroll costs to get loan forgiveness. Now, the PPPFA allows for a minimum split of 60% to payroll costs. This PPP change will help small businesses who have high rent costs, for example. (1:37)
2. Previously, you had to spend your PPP funds in the first 8 weeks after receiving the PPP. Now, you have up to 24 weeks (or December 31, 2020, whichever is sooner) to spend the PPP funds to get loan forgiveness. (3:16)
3. Previously, you must have hired back all workers by June 30 to get PPP loan forgiveness. Now, you have until December 31, 2020 to do so. (4:58)
4. Previously, you must high back all employees to get forgiveness of the PPP. The only exception was if your former employees declined your rehiring job offer. Now, you are still allowed to get full forgiveness of the loan under certain other circumstances as well, such as if you could not return to the same level of business activity as you had before the pandemic. (5:46)
5. Furthermore, the deadline to apply for the PPP loan was extended from June 30 to December 31, 2020. (8:08)
There were a few other changes under the Paycheck Protection Flexibility Act. For example, you can now defer your payroll taxes until the end of the year and still get a Paycheck Protection Program loan. Also, the loan maturity date, if you decide to pay back the PPP loan, was extended from 2 years to 5 years for new loans only.
Got a question about the PPP loan or how the Paycheck Protection Program Flexibility Act works? Leave a comment below!
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