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Proposed PPP Flexibility Act Would Relax Certain Current Loan Requirements

Philip R. Stein

Businesses that receive forgivable loans through the Paycheck Protection Program (PPP) would get additional time and greater flexibility to make use of those funds under proposed legislation approved last week by the U.S. House of Representatives. By a 417-1 vote, the House passed on for the Senate’s consideration the PPP Flexibility Act. That Act, if it becomes law, would give employers 24 weeks to spend the money and have the loans forgiven. The current permitted period is just eight weeks.

Another change that would be brought about if the bill becomes law is a reduction in the percentage of the forgivable loan that must be spent on payroll. Currently, 75% must go to payroll. The PPP Flexibility Act would lower that to 60%. The longer covered period and lower payroll requirement would be accompanied by more time for employers to rehire laid-off workers, and would provide PPP recipients the opportunity to receive a special payroll tax deferment.

The measure could become law imminently, though the Senate’s discussions on this subject have to date focused on a 16-week period for spending the funds, rather than 24 weeks. Reports indicate that senators think that gap can be easily bridged, however. If so, PPP loan recipients should soon be able to enjoy a somewhat more relaxed time frame for making use of those loans, and greater leeway with respect to how they may choose to do so. In an economic landscape that has created a heightened sense of urgency on so many fronts, and narrowed options for countless employers and employees, even the relatively modest changes that would be wrought by the PPP Flexibility Act would surely be welcome news.

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