09/17/2020

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Businesses Now Have More Flexibility With Stimulus Funding



Senate Votes to Loosen Restrictions on PPP Loans


Last week, the Senate approved a bill giving small businesses with Paycheck Protection Program (PPP) loans more flexibility.

This bill, named the Paycheck Protection Flexibility Act, already passed in the House with only one member dissenting. Subsequently, the bill then passed in the Senate with a unanimous vote, although Sen. Ron Johnson (R-WI) originally blocked approval until after a letter of record was entered to clarify the authorization period. Because the Senate is not officially in session, even one dissenting vote would have stalled the legislation until they returned to Washington, causing delays for business owners.

For context, the PPP is part of the Federal Government’s coronavirus stimulus package. PPP loans can be forgiven if borrowers meet certain conditions. Under the initial legislation, businesses had to use 75% of the money to pay salaries and keep workers on payroll—a high bar for businesses with few employees but high rent costs. The new legislation will lift some constraints on how businesses use the money.

Bill Lowers Payroll Requirement, Gives Business Owners More Time


The new legislation requires businesses to spend 60% of their PPP loans on payroll instead of the initial 75%. However, the rule still states that if a business spends less than 60% on paying employees, they’ll forfeit the chance to have the loan forgiven.

The bill also extends the amount of time businesses have to spend PPP money and still be eligible for loan forgiveness from eight weeks to 24 weeks. Some Republican senators argued for a 16-week spending period but compromised to get the bill passed quickly.

Borrowers in some parts of the country cannot reasonably expect their businesses to be open and making money within two months. The extension gives those businesses more cushion until they can restart operations.

What’s Left in the PPP


The PPP has received two infusions of funding from the Federal Government totalling $659 billion. Businesses facing pandemic-related financial difficulties rushed to get loans through the initial round of the program, which ran out in 13 days.

The second round is still open with about $100 billion left to be distributed. If the new, less stringent requirements for loan forgiveness pass, more businesses are likely to apply for the remaining money.

If you or a small business owner are looking for relief through a PPP loan, companies like Lantern, owned and operated by SoFi, have a way to apply to multiple lenders who are participating in the PPP, allowing small business owners to compare small business loan offers that include PPP loans.


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