The Treasury Department and Small Business Administration loosened the rules of the government’s Paycheck Protection Program.
Originally, the program rules required borrowers spend 75 percent of the money on payroll in order for the government to forgive it, effectively turning it into a grant. The threshold was lowered to 60 percent last week with the passage of the Paycheck Protection Flexibility Act (PPFA).
The agencies’ relaxation of the rule means that business owners will not be on the hook for the full amount borrowed if they choose to spend more than 40 percent on operating costs like rent and utilities.
If the loans are not forgiven, a business will have five years at 1 percent interest to repay the loan, rather than the initial two years.
Another key aspect of the PPFA is that it gives businesses until Dec. 31 to rehire workers in order for their salaries to count toward forgiveness; previously, the deadline was June 30.
The law also eased rehiring requirements. For instance, if a small business owner is unable to rehire an individual who was an employee on or before Feb. 15, or is able to prove they were unable to hire a similarly qualified candidate, their loan may still be eligible for forgiveness.
“This bill will provide businesses with more time and flexibility to keep their employees on the payroll and ensure their continued operations as we safely reopen our country,” SBA Administrator Jovita Carranza and Treasury Secretary Steven Mnuchin said in a joint statement.
In order to have their loans forgiven, small business owners must submit applications to the bank or lender that approved their initial request. The application focuses on key criteria centered around what types of expenses are forgivable. It also includes a step-by-step calculator for determining forgiveness eligibility.
The deadline to apply for PPP assistance is June 30.
A second round of PPP funding began April 27 after the initial tranche of $349 billion was awarded in 13 days. As of Friday, nearly 4.6 million loans totaling more than $512 billion had been distributed. About $130 billion remains available.
Sources: Fox Business, AgNet West