Favorable Changes to PPP Passed by House and Senate

Ruder Ware

Both the House and the Senate have now passed HR 7010 providing PPP borrowers more favorable terms.  We first alerted you on May 27th of possible changes to PPP being considered by both the House and the Senate .  Last night in a second vote (the first vote failed), the Senate passed the House Bill 7010, which provides the following new and improved terms:

  • The bill extends the PPP covered period from 8 weeks to the date that is the later of 24 weeks after loan origination or December 31, 2020.  Borrowers may also elect to stick with the eight week covered period.  There may be reasons you should select the eight week period over the 24 week period.
  • Borrowers now have until December 31, 2020 to restore FTE headcount or demonstrate an inability to either hire similarly qualified employees by December 31, or an inability to return to the same level of business activity as the business was operating prior to February 15, 2020 due to compliance with applicable guidance relating to COVID‑19 (e.g. social distancing requirements).
  • Borrowers will also only be required to use 60% of the PPP funds for payroll costs (prior law required 75% threshold) allowing 40% to be used for qualified non-payroll expenses.  Because of the way HR 7010 is worded, questions have been raised as to whether failure to use at least 60% for payroll costs will result in no forgiveness at all.  Senators have asked for clarification on that from SBA and Treasury.
  • The bill would also extend the minimum maturity of the loan to five years.
  • PPP borrowers are now eligible for the delay of payment of employer payroll taxes which was found in the original CARES Act.
  • Finally, the deferral period for repayment of any PPP funds including principal, interest, and fees is delayed until the date on which the amount of forgiveness is determined so long as borrowers apply for forgiveness within 10 months after the last day of the covered period.

These changes apply to all PPP loans regardless of when the PPP loan application was submitted and when loan proceeds were received.

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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