Updated: Aug 3, 2020
On June 5, 202, the Paycheck Protection Program Flexibility Act (PPPFA) was signed into law.
The PPPFA makes a handful of significant changes to Paycheck Protection Program (PPP). This could be impactful for construction businesses facing challenges in complying with the previously existing rules relating to PPP loan forgiveness. The key changes implemented by the PPP Flexibility Act are outlined below.
The new rules will implement the following changes:
Extension of the covered period for forgiveness: under the PPP Flexibility Act, borrowers can now obtain forgiveness for PPP loan proceeds used between the disbursement date and the earlier of (i) 24 weeks and (ii) December 31, 2020.
Change in limitations on forgiveness: according to the PPP Flexibility Act, borrowers must spend at least 60% of the loan proceeds for payroll costs and may use up to 40% for other permitted purposes.
Relaxation of the impact of employee reductions: the PPP Flexibility Act provides that forgiveness will not be deducted for employee headcount reduction between February 15, 2020, and December 31, 2020, if borrowers can supply supporting documents:
-> It is unable to rehire individuals who were employees on February 15, 2020 and is unable to hire similarly qualified employees for unfilled positions by December 31, 2020.
-> It is unable to return to the same level of business that was conducted before February 15, 2020 as a result of complying with standards for sanitation, social distancing and other worker or customer safety requirements.
-> The period to rehire employees is extended from June 30, 2020 to December 31, 2020.
Extension of maturity for new loans. According to PPP flexibility act, the period of loan maturity is lengthened from two years to minimum maturity of 5 years and up to 10 years for PPP loan amounts that are not forgiven
Extension of deferral period: permission for borrowers to defer payment until loan forgiveness is determined, instead of six months after loan disbursement.
The deadline to apply for a PPP loan is still June 30, 2020.
If you need any advice or services on any aspects of construction bookkeeping, accounting or tax, our construction accounting specialists are ready to help. Get in touch with us for free quote.