As some Paycheck Protection Program loan borrowers approach the close of their eight week covered period (the period during which loan proceeds can be used for certain expenses and the corresponding loan amount can be forgiven), Congress is considering making significant changes to the program that would apply to existing loans and new PPP loans. Reports are that the House and Senate are close to agreeing on PPP amendments, and that the House could pass its version on May 28, with the Senate to follow shortly thereafter. The proposed House legislation (which the Senate version closely follows) is intended to address some common complaints among borrowers, such as:
- Need more time to spend your PPP loan proceeds and get forgiveness? The House bill (still unnumbered) would extend the end of your covered period from eight weeks to the date that is the later of 24 weeks after loan origination, or December 31, 2020. The Senate bill would only double the covered period (from eight weeks to 16 weeks).
- Missed out on getting a PPP loan, and worried you can’t satisfy the certification required to apply for one because your economic uncertainty will probably be delayed until third quarter? The House and Senate bills would extend the program from June 30, 2020 to December 31, 2020.
- Worried you can’t restore your FTE headcount by the June 30, 2020 deadline? The House bill would give borrowers until December 31, 2020 to restore 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.
- Need more than 25% of the PPP loan proceeds for non-payroll expenses? The House bill would prevent the SBA from limiting how much of the PPP loan can be spent on non-payroll costs.
- Is two years too short to pay back the amount that isn’t forgiven? The House bill would extend the minimum maturity of the loan to five years.
Existing borrowers and prospective borrowers would certainly find something to like in the proposed legislation. The current PPP program allows for rather generous permitted loan amounts, which do not necessarily match up with permitted expenses paid (and to some extent incurred) during the eight week covered period. And the SBA’s 25% of loan proceeds limit on non-payroll expenses surprised some borrowers.