Payroll Protection Program Flexibility Act of 2020 (PPPFA)

Top 5 changes you need to know:

Here are the most impactful amendments to the original PPP Act and how to best utilize the forgiveness.

Covered period from 8 weeks to 24 weeks by PPPFA..

Increases likelihood of forgiveness, giving you 3x as much time to spend on qualified expenses.

If you received loan prior to June 5th, you can still elect an 8-week period, but can opt for 24- week extended period.

Act reduces percentage required to be used for payroll expenses from 75%-60%..

If less then 60% is used for payroll, the business will still be eligible for partial forgiveness where at least 60% of the forgiven amount was used for payroll.

The best way to calculate potential forgiveness is payroll expenses divided by .6 is the maximum loan forgiveness.

Conversely, you can now use up to 40% for rent, interest, and utilities, up from 25%..

Simply put…you can spend more money on “fixed” costs that aren’t payroll.

The PPPFA shed clarity for self-employed individuals..

Besides being eligible for unemployment benefits (which were not previously available to SE individuals), they can receive a maximum of $20,833with no employees. With the possibility of 100% forgiveness based on 2019 net self-employment income.

The PPPFA has now structured the proceeds that are NOT forgiven to be paid back in 5yrs rather than 24 months..

This new update automatically applies to loans processed after 6/5/20. For earlier loans, lenders and borrowers can restructure loan to the 5yr re-payment plan. Also, the SBA released a new application for loan forgiveness (SBA Form 3508), which is a simplified version of the original form and includes all PPPFA updates.

Things to keep an eye on..

As currently as of 7/17/20, Treasury Secretary Mnuchin appears to back a proposal to forgive all PPP loans under $150,000 regardless of how the funds were spent. This would account for over 80% of the roughly 5 million loans issued. Also, discussion into another round of funding has been going on. It will likely require stronger tests, and require statements showing huge revenue hits from Covid-19. It is important to stay current as lawmakers are actively proposing new amendments and are getting closer to another round of funding.

RevUp Accounting can help you with any stage of this process. Speak to one of our professionals today!