5 Things Nonprofits Need to Know About the PPP Loan Flexibility Act

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The Paycheck Protection Program Loan Flexibility Act of 2020, signed into law on June 5, 2020, amends the Paycheck Protection Program (PPP) to give borrowers more freedom in how and when loan funds are spent while retaining the possibility of full forgiveness. Here are five things nonprofits need to know about the PPP Loan Flexibility Act:

  1. Borrowers now have 24 weeks to spend loan proceeds, up from 8 weeks. Borrowers can use the new 24-week period to restore their workforce to pre-COVID-19 levels in order to obtain full forgiveness. The new deadline to achieve this is December 31 vs. the previous deadline of June 30.
  2. The Act also reduces mandatory payroll spending from 75% to 60%.
  3. Two new exceptions let borrowers obtain full forgiveness even without fully restoring their workforce. Borrowers can now reduce workforce requirements based on the inability to find qualified employees or if they were unable to restore operations to Feb. 15, 2020, levels due to COVID-19 restrictions.
  4. Time to pay off the loan has been extended to five years from the original two while retaining the original 1% interest rate.
  5. The Act now lets businesses delay paying payroll taxes even if they took a PPP loan.

PPP Loan Forgiveness of $46,154 Per Employee

On June 24, 2020, the Small Business Administration (SBA) released a revised loan forgiveness application with instructions for the Paycheck Protection Program.

The PPP allows loan forgiveness for payroll costs — including salary, wages, and tips — for up to $100,000 annualized per employee, or $15,385 per individual over the eight-week period. The new interim final rule establishes the 24-week maximum for full loan forgiveness at $46,154 per employee.

Borrowers who received PPP funds prior to June 5, 2020, may choose between using the original eight-week covered period or the new 24-week covered period.

Borrowers are responsible for calculating the total amount of loan forgiveness and must provide necessary documentation with their forgiveness application to their lender. The lender must then conduct a “good faith” review of the application and supporting documentation.

PPP Loan Application Deadline Extended

On July 4, 2020, the president signed into law a bill to extend the deadline to request Paycheck Protection Program loans to August 8, 2020, from June 30, 2020. 

The PPP program has about $130 billion left to spend. PPP loan applications may be submitted to any lender that participates in the SBA’s 7(a) loan program.

The Church Law Center of California advises churches and other nonprofits on how to protect themselves from risk while furthering their mission. Call us today at (949) 892-1221 or reach out to us through our contact page.

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