The new Paycheck Protection Flexibility Act
(H.R. 7010) which focuses on small businesses and restaurants in
particular has passed the House of Representatives.
The bipartisan Paycheck Protection Flexibility Act, was introduced
last week by Reps. Dean Phillips, D-Minnesota and Chip Roy,
R-Texas, and, is designed to extend the 8-week period under which
loan recipients could spend the PPP money to 24
weeks while helping correct other provisions that would
provide more flexibility to small businesses in the hospitality
realm.
Many hospitality businesses have high overhead costs and low worker
salaries, and, as such, will likely struggle to rehire their
employees as their businesses have not reopened yet or, if they
have reopened, have reopened with a smaller staff due to social
distancing requirements for their customers. Additional challenges
are presented as some former employees are seeing more income from
enhanced unemployment benefits which will also make it difficult to
rehire them.
A bipartisan group has already introduced a companion bill
in the Senate. Its backers include Sens. Cory Gardner, R-
Colorado, Tim Kaine, D-Virginia, Thom Tillis, R-North Carolina,
Steve Daines, R-Montana, Angus King, I-Maine, and Debbie Stabenow,
D-Michigan.
The Paycheck Protection Flexibility Act would:
. Extend the "covered period" under which small
businesses can spend the loan proceeds from 8 weeks to 24
weeks or until Dec. 31, 2020.
. Expand the 25% cap to use PPP funds on
non-payroll expenses, such as rent, mortgage interest and
utilities, to 40% of the total loan. Currently, small businesses
must use at least 75% of the loan for payroll expenses to get
maximum forgiveness, but under the bill that would change to 60% to
get maximum forgiveness.
. Give small businesses more time to rehire
employees or to obtain forgiveness for the loan if social
distancing guidelines and health-related actions from the CDC or
other agencies prevented the business from operating at the same
capacity as it had before March 1.
. Allow small businesses to take a PPP loan and also qualify for a
separate, recently enacted tax credit to defer payroll taxes,
currently prohibited to prevent "double dipping."
. Remove the limits on loan forgiveness for small
businesses that were unable to rehire employees, hire new employees
or return to the same level of business activity as before the
virus.
. Extend the loan terms for any unforgiven
portions that need to be repaid from 2 years to 5
years, at 1% interest.
. Extend the period for when a business can apply for loan
forgiveness, from within 6 months to within 10
months of the last day of the covered period, before it
must start making interest and principal payments. Under the new
bill, PPP loan interest and payment of principal and fees will be
deferred until the loan is forgiven by the lender.
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Be well and stay safe!
Originally published 29 May 2020
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