Last week, President Trump signed into law a new bill that effectively relaxes Paycheck Protection Program loan requirements for many small businesses—the Paycheck Protection Forgiveness Act.
The law allows businesses a bit more leeway concerning where the money coming from the loans, part of the Coronavirus Aid, Relief and Economic Security (CARES) Act, are spent, as well as a few other key points. Here's what you need to know:
- Businesses now have 24 weeks to spend funds from the loans. The period was previously 8 weeks.
- To be eligible for loan forgiveness, businesses must spend at least 60% of the loan on payroll costs. The amount was originally 75%. This was one of the biggest complaints from businesses regarding the loans.
- The payback period for the loans for those businesses who are not seeking or are ineligible for loan forgiveness is now 5 years, an increase from the original period of 2 years.
- The act pushes back the deadline to rehire employees until December 31—originally June 30.
- It also eases forgiveness on rehiring requirements for employees. Your business can still be forgiven for loan amounts if one of the following statements are true:
- You can prove you were unable to rehire an employee who worked for the company on or before February 15, 2020
- You can prove you were unable to hire a similarly qualified employee to those who worked for the company on or before December 31, 2020
- You can prove you were unable to return to the same level of business activity as you were operating at prior to February 15, 2020