Legislation Makes PPP Spending More Flexible

June 11, 2020
In The News

The Paycheck Protection Program Flexibility Act signed into law on June 5 eases some restrictions⁠—like the spending timeline and parameters⁠—but the adjustments don’t relieve the frustrations lenders and borrowers have expressed about the forgiveness application process.

The bipartisan legislation, introduced by Democratic Rep. Dean Phillips last month , has been eagerly anticipated by the hospitality industry, said Ben Wogsland, director of government relations for Hospitality Minnesota.

“This change is coming a little later than we would have liked for some people,” he said. “This is definitely going to help them in a big big way. It will make it so that more hospitality businesses are actually able to hit the metrics of the programs to be able to get the loans forgiven. That said, there's open questions about how much more relief this industry may need to survive.”

One of the most significant changes to the program? More time to use loans. Initially, small businesses needed to spend the money over an eight-week period, but now, they’ll have 24 weeks, or until Dec. 31, whichever is earlier. The clock starts as soon as the loan is disbursed.

Another major adjustment is changing the amount to be used for payroll expenses from 75 percent to 60 percent for qualifying for loan forgiveness. This increases the amount borrowers are able to use for other eligible business expenses, such as mortgage payments, rent, electric, and overhead. Hospitality industry leaders say it’s a welcome change.

Additionally, the updated legislation includes safe harbors from reduction in loan forgiveness. What’s more, PPP loans made after June 5 can be paid off over a five-year period.