On Thursday, May 28th, the House of Representatives passed a Bill, that, if ratified by the Senate and the President, would make significant changes to the rules governing forgiveness of PPP loans.
The Bill, HR 7010, the Paycheck Protection Program Flexibility Act of 2020, was sponsored by Rep. Dean Phillips, (D-MN-3) and co-authored by Rep. Chip Roy (R-TX-21). It passed by a vote of 417-1, even though, under a suspension of House rules, usually reserved for non-controversial legislation, it only required a two-thirds majority for passage.
Specifically, the Bill:
- Extends the PPP program from June 30th to December 31st, 2020, extending the period in which borrowers can re-hire employees to pre-COVID-19 levels.
- Extends the 8-week period, during which eligible expenses are forgivable, to 24 weeks.
- Extends the loan term from 2 to 5 years.
- Increases the current limitation on forgivable non-payroll expenses (such as rent, utility payments and mortgage interest) from 25% to 40% of total expenditure.
- Ensures full access to payroll tax deferment for businesses that take PPP loans.
The Senate is expected to review the House Bill when it returns to session next week. It is anticipated that the Senate will amend the Bill.
The PPP program has proven to be hugely popular with small businesses. As of May 27th, 4.45 million entities have been approved for or received PPP Loans totaling $510.5 billion in value. The average loan size is $115k, with 64% below $50k, 79% below $100k and 0.9 % above $2 million. Over $140 billion in PPP funding is still available.
KROST has assisted over 250 firms and individuals apply for and receive over $200 million in PPP and EIDL loans. It has also provided a popular PPP Budgeting, Tracking and Optimizing Tool free of charge to its customers.
This article will update as the Bill works its way through the Senate.
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