Last night the Senate passed a House bill that attempts to give recipients of PPP loans more flexibility in spending PPP loan proceeds. Assuming the President signs the bill, there are 5 main changes:
- recipients will have 24 weeks to use the PPP funds instead of 8, although recipients can still choose the 8-week period;
- 60% of the funds (instead of 75%) must be used on payroll. Critically, if less than 60% are used, none of the loan will be forgiven;
- the adjustment based on a reduction in employees has been tweaked to account for an employer’s inability to rehire an employee or similarly qualified person;
- the time to repay any portion that is not forgiven is 5 years;
- recipients of PPP funds have the option to defer payroll taxes into 2021.
Unfortunately, the bill does not change the deductibility of expenses paid with PPP funds (e.g., payroll). Hopefully Congress addresses that later—there has at least been talk about doing so. We will continue to monitor any changes to the program.