President Donald Trump on June 5 signed legislation giving small businesses more flexibility on how and when they use their loans under the U.S. Small Business Administration's Paycheck Protection Program.
The Senate passed the measure unanimously late June 3, giving a green light to the Paycheck Protection Program Flexibility Act. The legislation cleared the House May 28 by an overwhelming majority of 417-1.
The bill gives businesses 24 weeks to use the funds and still be eligible for forgiveness, up from the original eight-week requirement. It extends the covered period to Dec. 31 from June 30 and reduces the required percentage of PPP funds that must go toward businesses' payroll expenses to 60% from 75%. It will let small businesses allocate 40% of their PPP loans to overhead expenses, up from the previous 25% requirement.
The legislation also allows employers to delay payment of payroll taxes, and it permits lenders and borrowers to negotiate on modifying the terms of a covered loan if there is mutual agreement.
Additionally, it provides an exception to the payroll requirement if the employer cannot rehire employees in time to meet the requirement or can document that it cannot return to the same level of business activity that it engaged in prior to Feb. 15 due to regulations or guidelines established by the Department of Health and Human Services, the Centers for Disease Control and Prevention, or the Occupational Safety and Health Administration.
Although the measure passed both houses of Congress easily, members of both chambers signed a letter saying despite the extension in forgiveness, the bill "should not be construed so as to permit the SBA to continue accepting applications for loans after June 30, 2020."
The letter, now part of the Congressional Record from the June 3 Senate floor proceedings, was signed by Sens. Ben Cardin, D-Md., Ron Johnson, R-Wis., Mike Lee, R-Utah, and Marco Rubio, R-Fla. The House authors of the PPP Flexibility Act, Reps. Dean Phillips, D-Minn., and Chip Roy, R-Texas, also signed the letter.