House and Senate Looking at PPP Loan Extension

The House is scheduled to vote today on changes to the Payroll Protection Program, not to bring more money into the program, but to create greater flexibility with those proceeds and the time frame for their use.

The total funds made available for the PPP was $669 billion.  The initial $349 billion was exhausted in 13 days. The $320 billion second tranche of funds, approved at the end of April, has seen significantly less demand with still more than $100 billion remaining uncommitted.

The more immediate issues are focused on forgiveness as the initial tranche of funds will see its eight week loan forgiveness period begin to expire in early June. The proposed legislation from the House will include:

  • Extend the current eight-week period during which businesses must use funds to have loans forgiven to 24 weeks or Dec. 31, whichever comes sooner.
  • Allow businesses five years to repay loans instead of two.
  • Scrap a rule that no more than 25% of proceeds can be spent on expenses other than payroll related costs.
  • Create more transparency in the program.

The Senate appears in agreement with the House package, barring no last minute changes.

It does not appear that the issue of deductibility of covered expenses, for tax purposes, is being dealt with in the proposed legislation, but indications are it will be reversed by legislative action, further IRS guidance, or a court ruling.

Insider Take: When the legislation is passed, it should create additional flexibility for the timing and use of funds.  Will also probably change the application for forgiveness.  Make sure you are checking in with your bank to get the latest updates.

 

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