Congress recently voted to extend the Paycheck Protection Program (PPP) for five additional weeks. The bill was signed into law on July 4. The new law allows small businesses until August 8 to apply for the approximately $129 billion in PPP funding remaining.
By way of background, the PPP was launched in early April as the COVID-19 pandemic battered the U.S. economy and forced many businesses to close. The program provides forgivable loans businesses can use to cover payroll and selected other overhead costs.
The new law follows closely on the heels of the Paycheck Protection Program Flexibility Act (PPPFA) enacted in June, which provided favorable changes allowing most doctors to achieve 100% loan forgiveness, provided they properly account for and document their PPP expenditures. Under the PPPFA, the percentage of the loan proceeds that must be spent on payroll costs was reduced from 75% to 60%, thus increasing the amount available to be spent on rent, utilities, and mortgage interest from 25% to 40%. More importantly, that law allows you to elect to triple the time you have to spend the PPP funds from 8 weeks to 24 weeks. This time period is not automatic, so you must make sure you elect to use the 24-week period when you file your application for PPP loan forgiveness.
Business owners who have not yet applied for PPP funding should do so now, in order to receive loans that can be forgiven tax-free. With more time to apply, and an easier road to 100% loan forgiveness, this represents an excellent opportunity to help recover from the financial hit caused by the COVID-19 related closing and the increased operating costs and reduced productivity upon reopening.
Author: John S. Polgrean.
This blog is intended for informational use only. The information contained herein should not be construed as offering legal advice or a legal opinion.
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