BACK

Your Business Credit

How to make the most of the new PPP loan rules

A new law gives business owners more flexibility in how they use Paycheck Protection Program funds

Summary

Recent rules governing Paycheck Protection Program loan forgiveness left a challenge for brick-and-mortar businesses in states that had not allowed them to reopen yet. Now, under new legislation, it will be easier for borrowers to make the most of the loans.

The content on this page is accurate as of the posting date; however, some of our partner offers may have expired. Please review our list of best credit cards, or use our CardMatch™ tool to find cards matched to your needs.

Many small business owners who received loans under the Paycheck Protection Program (PPP) have faced a big challenge: The funding arrived before they were able to call their team back to work – making them worry that the loan would not be forgivable.

In case you’re not familiar, the PPP is part of the coronavirus stimulus package. It offers small businesses a forgivable loan to cover eight weeks of payroll, plus an additional 25% of that amount for business rent, business mortgages, business mortgage interest or business utilities, provided they kept their employees on payroll or called them back.

Check out other insights from our credit card experts.

Ask Elaine a question.

Under a set of interim final rules issued on May 22, small business owners were given eight weeks from the time the loan was disbursed or from the first day of the payroll period in the covered cycle to use the money, or the loan would not be forgiven.

That left a challenge for brick-and-mortar businesses in states that had not allowed them to reopen yet.

Now, under new legislation, called the Paycheck Protection Program Flexibility Act of 2020, signed by President Donald Trump June 5, it will be easier for borrowers to make the most of the loans.

See related: How to apply for an SBA disaster loan

What’s in the PPP Flexibility Act?  

Most notably, the “covered period” has been extended from eight to 24 weeks from origination – or Dec. 31, 2020 – whichever is earlier.

The new law also makes it easier for business owners to use the money for expenses other than payroll and still get forgiveness. Now they can use up to 40% of the money for other eligible costs – up from 25%.

The law also extends forgiveness exemptions for businesses that can show they were not able to rehire individuals who were employees on Feb. 15, 2020; couldn’t hire similarly qualified people for unfilled positions before Dec. 31, 2020 or who can document an inability to return to the same level of business activity as the business had as of Feb. 15, due to certain government compliance requirements related to COVID-19.

Other noteworthy changes include:

  • An extension of the minimum maturity from two to not less than five years for loans originated on or after the date the new law was enacted.
  • A change in the deferral period to the date on which the forgiveness amount is remitted to the lender. Previously loans could be deferred for not less than six months and no more than a year.
  • Removal of the CARES Act requirement that PPP borrowers that receive any loan forgiveness can’t get the employer payroll tax deferral the CARES Act authorizes.

See related: New business financing sources to try when the bank says no

Bottom line

Very likely there will still be clarifications of the law from the U.S. Small Business Administration and the Treasury Department. In the meantime, if you have applied for a PPP loan or still plan to do so, it’s a good idea to get advice from your accountant.

The rules are complicated and given that many owners are hoping to get loan forgiveness, it’s important to get all of the details right.

Editorial Disclaimer

The editorial content on this page is based solely on the objective assessment of our writers and is not driven by advertising dollars. It has not been provided or commissioned by the credit card issuers. However, we may receive compensation when you click on links to products from our partners.

What’s up next?

In Your Business Credit

U.S. Bank launches new Altitude Go card

The new U.S. Bank Altitude Go Card rewards cardholders for dining, groceries, gas station purchases and streaming – all without an annual fee.

See more stories
Credit Card Rate Report Updated: July 8th, 2020
Business
13.91%
Airline
15.48%
Cash Back
16.09%
Reward
15.82%
Student
16.12%

Questions or comments?

Contact us

Editorial corrections policies

Learn more

Join the Discussion

We encourage an active and insightful conversation among our users. Please help us keep our community civil and respectful. For your safety, do not disclose confidential or personal information such as bank account numbers or social security numbers. Anything you post may be disclosed, published, transmitted or reused.

The editorial content on CreditCards.com is not sponsored by any bank or credit card issuer. The journalists in the editorial department are separate from the company’s business operations. The comments posted below are not provided, reviewed or approved by any company mentioned in our editorial content. Additionally, any companies mentioned in the content do not assume responsibility to ensure that all posts and/or questions are answered.