The Paycheck Protection Program Flexibility Act — bipartisan legislation signed into law on June 5 — eases the payback and forgiveness rules for small business owners who receive loans through the Paycheck Protection Program.
Although debate remains about whether temporary workers on assignment from staffing firms should be counted as workers for the client buyer or for the staffing provider, it is in the interest of staffing buyers to keep an eye on PPP requirements.
“Buyers will be concerned coming out of this that suppliers are solvent and capable of both supplying temps and meeting their legal obligations, so as joint employers they do not have to pick up the bill for any violations,” said Fiona Coombe, SIA’s director of legal and regulatory research.
Who is eligible? The PPP is part of the Coronavirus Aid, Relief, and Economic Security Act, or CARES Act, a $2 trillion federal stimulus package launched in late March to provide businesses with support during the Covid-19 pandemic. It is an expansion of the Small Business Administration’s loan program and open until June 30. The loan may be used to cover payroll costs as well as business overhead such as mortgage interest, rent and utilities payments.
Companies eligible to apply for a PPP loan are businesses with no more than 500 employees, whose principal place of business is in the US; or businesses that meet the SBA employee-based size standards for the industry in which it operates (if applicable) based on the North American Industrial Classification System classifications.
Up-to-date details on the PPP are available in SIA’s research report, “Covid-19: PPP loans and paid leave FAQs.”
The Paycheck Protection Program Flexibility Act will provide businesses with more time and flexibility to keep their employees on the payroll to help ensure their continued operations as the country reopens, US Treasury Secretary Steven Mnuchin and SBA Administrator Jovita Carranza said in a joint statement announcing the modifications.
Law firm Ortoli Rosenstadt LLP summarized the changes as follows:
- Borrowers have until Dec. 31 to spend their PPP funds, a change from the previous deadline of June 30.
- Borrowers have up to 24 weeks to use the funds on a forgivable basis, an extension from the previous eight-week requirement.
- The payroll expenditure requirement drops to 60% from 75% but is now a cliff — meaning that borrowers must spend at least 60% on payroll or none of the loan will be forgiven.
- Borrowers can restore their workforce levels and wages to the pre-pandemic levels required for full forgiveness by Dec. 31, a change from the previous deadline of June 30.
- The legislation includes two new exceptions allowing borrowers to achieve full PPP loan forgiveness even if they don’t fully restore their workforce. The new bill provides that the forgivable amount must be determined without regard to a reduction in the number of employees if the recipient is (1) unable to rehire former employees and is unable to hire similarly qualified employees, or (2) unable to return to the same level of business activity due to compliance with federal requirements or guidance related to Covid-19.
- Borrowers now have five years to repay the loan instead of two.
- The bill allows businesses that took a PPP loan to also delay payment of their payroll taxes, which was prohibited under the CARES Act.
The loans are for a maximum $10 million at a fixed rate of 1%, and the new rules confirm that June 30 remains the last date on which a PPP loan application can be approved.
The Paycheck Protection Program launched on April 3 with $349 billion in program funds. It was expanded on April 27 with an additional $320 billion. Through May 16, the program had approved more than 4.5 million loans worth more than $511 billion, according to the SBA.