Government eases PPP loan terms to aid small business: What to know

Congress passed bill that gives small businesses more time and flexibility to use PPP loans

President Trump signed legislaltion on Friday that makes changes to the Paycheck Protection Program in order to give business owners more flexibility to use the popular loans.

Known as the “Paycheck Protection Flexibility Act,” the law makes two major changes to provisions regulating how much time business owners have to use the money and what it can be spent on.

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The law extends the period that recipients have to use the loan from eight weeks to 24 weeks. Many business owners had asked for the government to lengthen the eight-week window because some owners had to shut down entirely while many others were only partially operating throughout the height of the coronavirus pandemic. It also gives business owners more time to rehire employees who may have been laid off so that staffing levels meet the requirements for loan forgiveness.

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Giving even more leeway to business owners, lawmakers say forgiveness should be determined without regard to a reduction in staffing if a business is unable to hire former employees, unable to hire similarly qualified employees or has not yet returned to full-on business activity because of coronavirus-related guidelines.

Another big win for small businesses is that the law reduces the percentage of a forgivable loan that must be put toward payroll to 60 percent from 75 percent. The other 40 percent of the loan can be used on things like mortgage interest, utilities and rent.

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Small Business & Entrepreneurship Council President & CEO Karen Kerrigan said the legislation makes PPP “more effective and relevant for many small businesses,” but she believes there are additional changes that could be useful.

“Small businesses would also like to see an expansion of the essential expenses that are forgivable under PPP,” Kerrigan said in a statement. “We are working to add technology costs – such as cloud services – to the list of forgivable expenses, as these tools are as vital as utilities and internet to small businesses.”

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