Alert: New Changes for PPP Loans Pass Congress

Posted By Mike Meyer, Thursday, June 4, 2020

u.s. capitol

By Patrick O'Brien, JD, legal coordinator, American Med Spa Association

On Wednesday, June 3, the United States Senate voted to pass a measure that changes some of the rules and deadlines for the Paycheck Protection Program (PPP). The House of Representatives already passed this measure last week, and with passing the Senate, it now heads to the president's desk for his signature. As we have covered in the past (see here), this program has gone through constant refinement, with the actual rules for loan forgiveness only recently being released (see here). This new bill should provide borrowers some much needed flexibility in using the loan funds in ways that make sense.

We have covered details of this program in some webinars and articles. To briefly recap, the PPP provides loans to small businesses equal to 2.5 months of their average payroll expenses. The terms are for two years at 1% interest. The main benefit of the program is that money spent on payroll and other approved expenses during the first eight weeks is eligible to be forgiven. The current bill would extend that eight-week forgiveness period to 24 weeks or December 31. The rules currently require that 75% of loan funds be spent on payroll expenses in order to qualify for forgiveness. This bill lowers that threshold to 60%; however, it makes this figure a requirement to qualify for any forgiveness at all. Originally, employers needed to hire back employees by June 30 to be eligible to 100% loan forgiveness. This new bill extends that date to match up with the end of the enhanced unemployment benefits in late July. The bill does not add any new funds to the program or alter the size of the loans, so by allowing 24 weeks to spend the loan, it should be possible for most borrowers to use it in ways that qualify for forgiveness.

This program was developed and implemented extremely quickly, so it has had its share of issues and criticisms. However, both the legislature and the Small Business Administration have acted quickly to fix issues and resolve problems as they arise. There will undoubtedly be more changes and guidance needed as borrowers begin applying for loan forgiveness. AmSpa will endeavor to keep you updated on developments for this and other programs.

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