Jun 05, 2020

Congress Loosening the Rules on PPP Loans

Small businesses have had a rocky ride with the Paycheck Protection Program (PPP), which was supposed to be the Main Street and American workforce relief component of the $2 trillion coronavirus bailout package Congress passed in March. Businesses that applied for PPP loans initially experienced holdups on the funds’ arrival. Then they found an exhausting set of PPP expense tracking obligations and rules on how to spend the money—rules that were, in some cases, impossible to comply with.

That may be about to change. Congress just passed a sweeping set of changes to the PPP repayment rules, by a whopping landslide vote 417–1 vote in the House of Representatives and by unanimous consent in the Senate. The bill now heads to President Trump’s desk.

The changes do not involve any new stimulus money but instead they loosen the rules under which small businesses can get PPP loans forgiven. There are 5 big ways that this bill would make PPP loan forgiveness a whole lot easier. 

1. Less Money Required to Be Spent on Payroll

The PPP rules originally required a business to pay 75% of the loan funds toward payroll if they wanted full forgiveness to ensure employees stayed afloat during this economic crisis. But ongoing shelter-in-place orders make normal levels of staffing impossible for some nonessential business sectors or businesses with very few employees. 

That threshold is lowered to 60% percent on payroll under the new bill, so businesses are freed up to spend as much as 40% of their loan money on costs other than payroll costs.

2. More Time to Use the Loan Funds

The original PPP bill demanded that the loan money be spent within just 2 months. Businesses have up to 6 months to spend that loan money under the new proposal, a real lifesaver for businesses that are still allowed not to reopen.  

3. More Time to Hire Back Workers

Currently, businesses have to rehire their workers by June 30 to get loan forgiveness, a date that looms less than a month away. The proposed new version extends that date out to the end of the year on December 31, 2020.

4. More Time to Repay the Loan

Most businesses will not be able to get their entire loan forgiven and will have to pay some of it back. That timeline was originally 2 years, but the new PPP revisions would give businesses a full 5 years to repay.

5. A Break on Payroll Taxes

This change is not a deadline extension, but a whole new benefit. Businesses would be able to defer payroll taxes under PPP under this bill, yet still be eligible for loan forgiveness.

We should stress again that these PPP changes have only passed the Congress—do not have the president’s signature. But a bipartisan House majority vote of 417–1 and a unanimous consent in the Senate are undeniable signs of support from both sides.

These changes only apply to businesses that already have a PPP loan approved. Those that did not get approved still have many other loan options, and businesses can still apply for a PPP loan if they have not done so yet. PPP loans are an urgent lifeline for many small businesses, and despite the program’s early stumbles, the Paycheck Protection Program can really help businesses hit paydirt again someday soon. 

About the author

Joe Kukura
Joe Kukura
Joe Kukura is a San Francisco freelance writer whose work also appears in SF Weekly and SFist. He’s written financial advice for NerdWallet, tech industry analysis for the Daily Dot, sports content for NBC Bay Area, and good, old-fashioned clickbait for Thrillist.

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