Changes To The Paycheck Protection Program

Changes To The Paycheck Protection Program

On June 2, 2020, the Senate unanimously approved H.R. 7010 (the Bill), a bill that changes several critical terms of the Paycheck Protection Program (PPP). 

  1. You’ll have longer to repay any loan proceeds that are not forgiven, but only for those loans made AFTER the passage of the Bill. The Bill extends the period for these loans to 5 years while existing loans would still have a loan term of 2 years.
  2. The Bill increases the likelihood that a large percentage of a borrower’s PPP loans will be forgiven. It does so in four ways:
    • Extension of the covered period – The Bill extends the covered period from 8 weeks to 24 weeks from the loan origination date, or December 31, 2020, whichever comes first.
    • More of the proceeds can be spent on non-payroll costs, but be careful. While the Bill raises the cap for non-payroll costs from 25% to 40%, it also created a cliff: if a borrower fails to spend 60% of the loan proceeds on payroll costs, NONE of the loans will be forgivable.
    • You have longer to replace full-time equivalents (FTE’s) and/or restore salaries. The Bill extended the June 30th deadline to December 31, 2020. Therefore, as long as the FTEs or salary/hourly wage are restored to February 15, 2020 levels any time prior to the end of 2020, no reduction in forgiveness will be required.
    • Businesses that remain partially or fully closed through the end of the year will get new relief. The Bill provides that during the period February 15, 2020, through December 31, 2020, the amount of loan forgiveness will NOT be reduced when a borrower experiences a loss of FTEs if the borrower, in good faith, is able to document any of the following:
      1. There was an inability to rehire individuals who were employees of the eligible recipient on February 15th,
      2. There was an inability to hire similarly qualified employees for unfilled positions on or before December 31, 2020, or,
      3. There was an inability to return to the same level of business activity as such business was operating at before February 15th due to compliance with requirements established or guidance issued by the Secretary of Health and Human Services, the Director of the Centers for Disease Control and Prevention, or the Occupational Safety and Health Administration during the period beginning on March 21, 2020, and ending December 31, 2020, related to the maintenance of standards for sanitation, social distancing, or any other worker or customer safety requirement related to COVID– 19. This is the BIG ONE. It basically allows businesses, restaurants, and bars for example that could not fully open by December 31st due to government restrictions, to not have to reduce the forgivable amount because of a loss in FTEs.
  3. The 8-week covered period remains an option. The Bill does not require all borrowers to adopt a 24-week covered period. Any business that borrowed its PPP loan prior to the date the Bill is signed into law, can elect to use the 8-week period beginning on the date it received the funds. Businesses who have spent all of their proceeds and qualify for full forgiveness, may not wish to wait until the end of the year to apply.
  4. You can now defer certain payroll taxes even if you received a PPP loan. The Bill allows an employer who borrowed a PPP loan to now also defer all of its 2020 Social Security tax burden into 2021 and 2022, even if the PPP loan is forgiven prior to December 31, 2020. Please check with your accountant regarding this, as this will only increase the amount of payroll taxes you will have to pay back in 2021 and 2022 and may cause further legal problems if you can’t pay those taxes then.

Alfred Zeiler has over fifteen years' experience in business valuation, economic damages and forensic accounting. I develop supportable outcomes that stand up to cross examination. My commonsense approach and ability to simplify the complex when explaining financial analysis makes clients comfortable, and enables effective communication in mediation or court. Contact Alfred at or (954) 854-5803.

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