Senate Bill Adds Flexibility to Paycheck Protection Program

Business owners wondering whether the federal government was going to extend deadlines to spend Paycheck Protection Program funding and issue other guidance to further explain the program got their answer Wednesday.

That’s when the U.S. Senate passed legislation that provide more flexibility for the program, originally passed back in March as part of the CARES Act coronavirus relief package.

The PPP is designed to help small-business owners cover payroll-related costs and other designated expenses.

Among the highlights of the new legislation are an extension of the length of time businesses can take to spend the money (from eight weeks to 24) and a decrease in the amount of the loans that have to be spent on payroll (from 75% down to 60%).

Senate Majority Leader Mitch McConnell praised the legislation, which passed on a unanimous consent, from the floor of the Senate.

“Today we’re passing another piece of legislation that makes a few targeted changes to the program,” McConnell, a Republican from Kentucky, said according to The Hill.  “I’m proud the Senate is sending it on to the president’s desk to become law.”

The House passed the legislation last month. After the Senate approval Wednesday, the bill goes to the White House for President Donald Trump’s signature.

The bill, assuming Trump signs it, would widen the window for businesses to be able to spend loans granted under the program. When the first $2.2 trillion coronavirus package, passed in March, it gave businesses eight weeks to spend PPP funds.

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Under the March $2.2 trillion coronavirus package, businesses were given eight weeks to spend PPP funds. The bill passed by the Senate on Thursday would extend it to 24 weeks.

It would also change a 75-25 divide included in the March bill — which required businesses to spend 75 percent of the loan on payroll and 25 percent on other fixed costs such as rent and utilities — to a 60-40 ratio.

The new legislation also:

  • Extends the deadline that businesses must rehire workers from June 30 to Dec. 31
  • Extends the two-year repayment term for the loan to five years for any portion that is not forgiven and must be repaid
  • Extends the deadline to rehire employees to align with the expiration of enhanced Unemployment Insurance, which was created through the CARES Act, and in some cases is higher than the median wage in 44 states.

The U.S. Small Business Administration had earlier issued Interim Final Rules better explaining the kinds of expenses that can be included in the 40% portion of the loan and still have it be forgiven, to include things like personal property, cars, trucks and other equipment.

Ron Knipping, a principal at Rehmann, a financial services and advisory firm with nearly 900 associates in Michigan, Ohio and Florida, said the kind of relief contained in the legislation is just what the doctor ordered for both lenders and borrowers.

“What people are really looking for right now is relief driven by Congress,” Knipping said. “The 60% for payroll would help the businesses,” Knipping said. “Expenses are huge. If I own a restaurant in New York City, my rent is huge. If I own a restaurant in Lansing, Mich., it might only be 10% of my revenue. (The new legislation) gives (businesses) more flexibility.”

As of last week, there was still some $130 billion left in the second round of the PPP funds, a fact Rob Scott, executive director of the SBA’s Great Lakes Region, which covers Michigan, Illinois, Indiana, Wisconsin, Minnesota and Ohio, attributed to the uncertainty over this new legislation.

With it passed (and again assuming Trump signs it), both Scott and Knipping are urging businesses to get their applications in.

“Right now there’s enough clarity, and there’s more than $100 billion,” Knipping said. “(With) the deadline past June 30, that gives people a lot more flexibility. If people need this, they should go get it.”