After recently passing in the Senate and the House of Representatives, H.R. 7010 was signed into law by President Trump on June 5. The bill allows additional flexibility for borrowers in the Paycheck Protection Program (PPP).
The PPP, which was originally created through the CARES Act in late March, gives low-interest loans to businesses and 501(c)3 nonprofits with less than 500 employees and the option to make those loans forgivable if the organization reaches pre-pandemic levels of employment by the end of the loan period.
This new legislation implements the following changes to PPP:
- Extends the time period during which the loan can be used from June 30 to Dec. 31 or 24 weeks after a loan is issued, whichever comes first
- Pushes back the deadline for which organizations must restore pre-pandemic employment levels from June 30 to Dec. 31
- Allows organizations to still receive loan forgiveness for employees that were not able to be rehired, as long as they provide documentation
- Allows organizations to spend up to 40% of a loan on non-payroll costs, such as rent and utilities, and still receive full loan forgiveness; previously, they were only allowed to spend up to 25% of the loan on overhead costs
- Extends the period to pay back the loan from two years to five years for borrowers who apply after the passage of H.R. 7010; organizations that applied before the passage are now able to negotiate loan maturity terms with their lenders
With these changes, the PPP program will grant nonprofits more flexibility in using these much-needed funds. Because of social distancing guidelines, for example, many organizations have had trouble hiring back workers and are spending many more loan dollars on overhead costs rather than payroll costs.
H.R. 7010 takes this common situation into account and gives these organizations more time to staff up and more discretion in allocating the funds to non-payroll costs.
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