Senate Leader McConnell Expedites Paycheck Protection Program Flexibility Act

Restaurant owners could be in store for another de facto fiscal stimulus this month. Aides to Senate Majority Leader Mitch McConnell say that he hopes to move the Paycheck Protection Program (PPP) Flexibility Act by unanimous consent in the Senate. It contains generous modifications to the forgivable loan program that will benefit restaurant owners, especially those with high rent and mortgage costs. Last week, the House of Representatives passed the Flexibility Act nearly unanimously. Once the Senate passes it, it will move to the White House for President Donald Trump’s signature.

Last week, lobbyists from the National Restaurant Association and the Independent Restaurant Coalition persuaded Congressmen Dean Phillips and Chip Roy to introduce the modification to the original PPP rules. The Flexibility Act will extend the deadline within which restaurants can use their funds, as well as easing original restrictions on non-payroll expenses such as rent.

Specifically, the bill lengthens loan forgiveness from 8 to 24 weeks. Repayment on unforgiven portions of loaned funds will also be extended from two to five years. Borrowers could use a greater percentage of forgivable funds on rent and certain other non-payroll expenses.

“To further strengthen the Paycheck Protection Program so it continues working for small businesses that need our help,” said McConnell today from the Senate building, “I hope and anticipate the Senate will soon take up and pass legislation that just passed the House by an overwhelming vote of 417-1.”

On May 21, the U.S. Small Business Administration (SBA) posted interim final rules (IFR) on PPP loan forgiveness:

  • Forgiveness for payments from PPP loan funds to “owner employees” is limited to 8/52 of total 2019 compensation, or $15,385 (whichever is less) across all businesses.
  • Multi-businesses owners cannot pay themselves from PPP essentially all of their total compensation.
  • Payments to furloughed employees are eligible for loan forgiveness subject to the $100,000 prorated maximum. There is also a new, specific methodology for calculating full-time employee labor so that forgiveness is not impacted by employees who do not accept an offer to return to work.

According to Congressman Chip Roy, the Flexibility Act will create more flexibility for small businesses by:

  • Extends the forgiveness period to 24 weeks.
  • Replaces the 75-25 rule with a 60-40 rule.
  • All new PPP loans will receive a 5 year maturity. Existing loans will remain at a 2 year maturity.
  • Allows businesses that receive forgiveness to also receive payroll tax deferment
  • Ensures small businesses won’t be penalized by high unemployment benefits
  • Creates a safe harbor for businesses that are required to open at only 50% capacity.

Photo by Heidi Kaden on Unsplash

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