More  Flexibility and Clarity for the Paycheck Protection Program

The Paycheck Protection Program (PPP) has been vital for more than 4 million businesses fighting loss revenues due to COVID -19. As with any loan, business owners have had to balance the short-term stimulus provided by funds, with the long-term implications of repayment. Coupled with this has been a lack of clarity on when and how funds from the loans could be used. Recently, with the Paycheck Protection Program Flexibility Act, Congress has offered some leeway that will be welcome by business owners. 

The June 5 Flexibility Act changes key terms for PPP. Loans will mature in five years, not two. Loan forgiveness was extended from eight weeks to 24. The percentage of loans spent on payroll decreased from 75 percent to 60 percent. And the deadline to replace full-time employees moved from June 30 to December 31, 2020. These are likely all welcome changes for entrepreneurs, particularly self-employed borrowers, who also received clarification that their loans would qualify for full forgiveness. 

These extensions are also good news for business owners still considering PPP. If owners act now, they can still meet the June 30 deadline to receive some of the estimated $120 million in funds still available. The Flexibility Act addresses many issues that had business owners reluctant to apply for the PPP, so there may be a demand in the remaining weeks of eligibility. 

While this news has been positive for business owners, some question if the new terms will cause banks to be less willing to lend. A particular sticking point is extending the maturing rate to 5 years at 1 percent interest. So much can change in 5 years, and banks may not be willing to be saddled with those low-rate loans for such a long period of time. 

Economic Developers should be prepared for a potential uptick in customers seeking PPP guidance, after the program slowed down following the initial rush when it was launched. Visit the SBA’s site for info on the program and make sure to advise local businesses to seek the advice of trusted lawyers and lenders to navigate the PPP process.