Congress Approves Widened PPP Loan Terms

June 4, 2020

President Donald Trump last Friday signed a bill approved by Congress that amends the CARES Act to give more flexibility to Paycheck Protection Program borrowers regarding how they can use their loan proceeds. Relaxed rules under the PPP Flexibility Act, which was passed by the House and approved by the Senate last week, also affect some of the requirements for becoming eligible for loan forgiveness.

  • Borrowers now have 24 weeks, rather than eight weeks, to disperse their loan funds after receiving them in order to qualify for forgiveness.
  • The mandatory amount of the loan to be spent on maintaining payroll costs has decreased from 75% to 60%. The remaining 40% must be used for eligible expenses, such as utility payments, rent or mortgage interest, or other payroll costs.
  • The borrower must maintain the same number of full time–equivalent employees during the 24-week period of the loan as before the pandemic.

The Small Business Administration and the Treasury Department had released forgiveness application forms last month, but new forms and guidance must now be issued. There’s no specific timeline yet for these updates, but the National Association of REALTORS® expects this will be among the Trump administration’s top priorities.

It remains true that businesses must reduce the amount of the loan qualifying for forgiveness by any proportionate percentage drop in employee numbers, but they now have a six-month extension, until Dec. 31, to rehire or fill those positions. Independent contractors and the self-employed will have an amount equal to a 24-week portion of their 2019 net earnings—capped at $15,385 and based on their 2019 Form 1040 Schedule C, Line 31—automatically forgiven. But those borrowers cannot use any of the remaining loan amount for payroll costs. The borrower must certify that the 40% of the loan that is not required to go toward payroll went to one of the eligible uses and provide documentation verifying their payroll costs and non-payroll costs, as well as the average number of FTE employees before and during the 24-week coverage period.

The SBA is auditing all loans of more than $2 million and has cautioned that it has the right to audit any PPP loan, regardless of the amount. However, the agency also said that loans for less than $2 million will generally be considered to have met the “good faith” requirement for showing the need for the loan. Borrowers who do not meet all of the requirements may still be eligible for partial forgiveness, and the SBA has set the repayment terms at five years with 1% interest. Borrowers can prepay any portion of their PPP loans without penalty.

SBA lenders are still accepting PPP applications, and the program still has funding. PPP borrowers can now have up to the end of the year to use their funds, but the program is only accepting applications through June 30. Stay up to date on PPP loans at