The Paycheck Protection Program Flexibility Act of 2020 was signed into law by President Trump on June 5. The U.S. Senate unanimously passed the Paycheck Protection Flexibility Act on Wednesday, June 3, a bill aimed at addressing issues with the Payment Protection Program (PPP). The PPP, a measure of the CARES Act that provides economic relief to small businesses impacted by COVID-19, has been criticized for its faulty roll-out and restrictions. The new bill, passed by the House on May 28 as well, provides small businesses with more flexibility in how they use and allocate federal aid dollars.
Specifically, businesses now have up to 24 weeks to spend their loan dollars and still qualify for forgiveness. The original version of PPP required businesses to spend aid within 8 weeks, a timeline that was especially restrictive for businesses who are still not yet permitted to reopen.
It also adjusts the limits on non-payroll expenses. Previously, businesses were only permitted to allocate up to 25% of the loan to non-payroll expenses with a loan term of two years. Now, businesses may allocate up to 40% of the loan for non-payroll expenses and still qualify for forgiveness. This is a huge advantage for a small business whose labor costs are just a small fraction of their overall operating costs.
Originally, PPP was implemented as a part of the $2.2 trillion CARES Act with the purpose of keeping businesses afloat and workers employed while the economy recovered from coronavirus. However, as states across the nation waver on whether to fully reopen their local economies, many small businesses are concerned that the aid will run out. The Paycheck Protection Flexibility Act is meant to ease restrictions so that businesses owners can do more with the funding they are given. In the meantime, law makers are discussing a fourth round of economic relief.
The GCSAA Government Affairs team will continue to monitor federal coronavirus relief efforts in Washington DC and share updates via this blog and in the COVID-19 advocacy landing page. For specific questions on the Paycheck Protection Flexibility Act, please reach out to Bob Helland, GCSAA’s Director of Congressional and Federal Affairs.