There was some good news for our small business owners as the Paycheck Protection Program Flexibility Act of 2020 was signed into law today (aka PPP Flex Act). The PPP Flex Act amends certain provisions of the CARES Act relating to PPP loans. You can view the full text here: Text – H.R.7010 – 116th Congress (2019-2020): Paycheck Protection Program Flexibility Act of 2020
1. Minimum PPP loan maturity of 5 years, and an allowance that lenders and borrowers can mutually agree to modify loan terms.
2. Borrowers now have until the earlier of 24 weeks after loan origination or 12/31/20 to spend potentially forgivable loan proceeds (the original deadline was 8 weeks after loan origination).
3. Borrowers may qualify for loan forgiveness without regard to reduction in full-time employees if they can document: inability to hire or rehire employees OR inability to return to normal business activities due to HHS, CDC, or OSHA guidance or requirements.
4. To qualify for forgiveness, 60% of loan proceeds must be used for payroll costs (the original requirement was 75%). This means that up to 40% of the forgivable loan proceeds can be used for mortgage payments, rent, or utilities.
5. Small businesses that receive PPP loan forgiveness can also now defer the Employer portion of Social Security taxes from 3/27/20 through 12/31/20.
6. Notably, the PPP Flex Act did not fix the issue of expenses paid by forgiven loan proceeds being non-tax-deductible. We do expect this technical fix to come eventually.
We expect more clarification as additional legislation is passed this year, so stay tuned. Please reach out to us with any questions as to how these changes apply to your business.
As such, before proceeding, please consult with us and other appropriate professionals, such as your accountant, and/or estate planning attorney on any details specific to you. Please don’t hesitate to reach out to us with your questions and comments. It’s what we are here for.
Emily Balmages, CFP®, CRTP
Director of Financial Planning, Warren Street Wealth Advisors
Investment Advisor Representative, Warren Street Wealth Advisors, LLC., a Registered Investment Advisor
If you have questions about any of this or would like to schedule a complimentary review you can Contact Us or call 714-876-6200 to book a free consultation.
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