The Senate passed a second try at the Paycheck Protection Program (PPP) to address concerns and unintended consequences on small business owners from the legislation’s strict conditions.
Specifically, PPP funds can now be used for an expanded array of qualified expenses, and the deadline for using the funds in order to comply with the loan forgiveness feature has been extended.
Business owners had objected to the timeline for spending the funds, noting that coronavirus social distancing orders prevented many from fully opening, and therefore making it difficult to meet deadlines.
“While well-intended by Congress, the eight-week period and the June 30th rehire date are simply too short as the public health emergency has continued longer than anticipated when the law was originally written,” Senator Joe Manchin, D-W.Va, said in a statement. “Many non-essential businesses, which represent the majority of PPP loan recipients, will not be able to open or rehire before the conclusion of the forgiveness period.”
If the eight-week period and rehire date requirements remain, he added, many borrowers will be unable to exhaust funding to permanently rehire their employees as they begin the arduous process of reopening during a time of uncertainty.
The primary purpose of the PPP loan was to maintain payroll costs and keep employees afloat, “but those funds should also provide a critical lifeline to businesses as states begin to re-open.”
The solution
Specifically, the bill will address two main areas of criticism:
- It amends Section 1106 of the CARES Act to allow a borrower under the Paycheck Protection Program to be eligible for loan forgiveness equal to the amount spent on covered expenses by the borrower during a 16-week period after the origination date of the loan.
- It will move the rehire date deadline from the fixed June 30 date to 16 weeks after the origination of the PPP loan in order to better match with reopening mandates and rules.
With more than 20 years serving financial markets, John Sullivan is the former editor-in-chief of Investment Advisor magazine and retirement editor of ThinkAdvisor.com. Sullivan is also the former editor of Boomer Market Advisor and Bank Advisor magazines, and has a background in the insurance and investment industries in addition to his journalism roots.
