Increases Time to Use Loan Funds
The CARES Act currently requires PPP borrowers to spend the loan over an 8 week period following the receipt of funds to have the loan forgiven. The House-passed bill extends this period to 24 weeks or until December 31, 2020.
Amends the 75% Payroll Rule
Currently, PPP borrowers must use at least 75% of PPP loans for payroll costs to receive full forgiveness. This legislation reduces this amount to 60%, allowing 40% of the loans to be used for non-payroll costs, which include rent, mortgage interest and utilities.
Allows Participation in Employer Payroll Tax Deferral
Currently, PPP borrowers cannot also participate in the CARES Act payroll tax deferral. If it becomes law, this exclusion would be eliminated.
Provides Safe Harbor for Some Job Reductions
Currently, PPP borrowers must maintain their FTE level to secure full forgiveness of their loan. The new bill would provide safe harbor from this requirement for borrowers in certain circumstances, including extending the deadline to December 31, 2020, with exceptions based on employee availability.
Increases Deferral Period
Under the CARES Act, borrowers have an automatic six month deferral period before they must begin to repay any unforgiven loan funds. This bill increases the deferral period to 10 months.
Extends Terms for Unforgiven Portion
Currently, PPP loans have a term of two years for any unforgiven principal. If enacted, this legislation extends the amount of time borrowers have to repay the loans to five years, at 1.00% interest. Any pre-existing loans may amend the note to reflect new maturity terms if both the lender (United Community Bank) and borrower mutually agree.