The Small Business Administration (SBA) says it will “promptly” release new forgiveness rules and guidance for firms. Why? A new Paycheck Protection Program (PPP) bill that eases some restrictions for small employers is becoming a law.
Originally, the PPP loans could be forgiven if an employer followed the 75/25 rule: 75% of the loan proceeds be used to cover payroll (up to $100,000 per employee) and expenses for health care, paid sick leave and other benefits. However, the new Paycheck Protection Program Flexibility Act (PPPFA) changes the rule to 60% for payroll costs.
Now, a firm has more time to spend the PPP loan since the period of the loan has been extended to 24 weeks (previously eight weeks). Firms also have until Dec. 31, 2020 to rehire workers (previously, they had until June 30). However, salaries eligible for forgiveness remain capped at $100,000.
The SBA released a forgiveness application in May that it’s now in the process of modifying. The SBA said the PPPFA will provide employers “with more time and flexibility to keep their employees on the payroll.”