A bill with changes to the restrictions on Paycheck Protection Program (PPP) loans has landed on President Donald Trump’s desk after passing the Senate on Thursday, June 4.
Changes in the PPP Flexibility Act include:
- An increase for amount allowed to be spent on certain non-payroll expenses from 25% to 40%;
- An extension of the deadline to spend the loan money from eight weeks to 24 weeks, or until the end of the year, whichever comes first;
- And an extension of the repayment period from two years to five.
The Small Business Administration (SBA) launched the program on April 3, a week after Trump signed the historic $2.2 trillion Coronavirus Aid, Relief and Economic Support bill into law. The PPP included $349 billion for loans, which was depleted in two weeks. A second round of funding added another $310 billion to the loan pool on April 24, of which about $130 billion remains.
To qualify for the loans, companies needed to have fewer than 500 employees or fewer employees than the SBA’s industry size standard, which is 1,250 employees for breweries. Loan amounts are calculated at 2.5 times the applicant’s monthly salary expenses, with a cap on salaries greater than $100,000. Approved non-payroll expenses include rent, utilities and interest on mortgages or other debt; all expenses but non-mortgage interest are eligible for forgiveness.
More than 80% of craft breweries told not-for-profit trade group the Brewers Association (BA) they had been approved for PPP loans and 95.7% of those breweries had received their funds. BA chief economist Bart Watson noted that the loans had bolstered brewers’ outlooks on their businesses’ survival; 42.4% of survey respondents said they were “somewhat more optimistic” or “much more optimistic” about the future.
“Why are breweries more optimistic? The number one reason is PPP loans, followed by the imminent reopening of states and then better than expected sales,” Watson wrote in his survey analysis.
The first round of loans arrived weeks after breweries nationwide had already shuttered for on-premise service and many had laid off staff.
In the original PPP requirements, in order to have total loan forgiveness, recipients need to rehire any employees on their payroll between February 15 and April 26 by June 30. The PPP Flexibility Act extends that deadline to December 31, which gives companies more time to regain business after lengthy closures, and includes some exceptions.
According to the National Law Review:
“Under the new changes, loan forgiveness will not be impacted by a reduction in FTEs [full-time employees] in the following circumstances:
- The borrower can document an inability to rehire individuals who were employees of the borrower on February 15, 2020, and an inability to hire qualified employees for unfilled positions on or before December 31, 2020, or
- The borrower can document an inability to return to the same level of business activity as it was operating at prior to February 15, 2020, due to compliance with requirements established.”