Q: What is the Paycheck Protection Program (PPP) Flexibility Act?
A: As I often tell Iowans who send me an email, call my office or attend one of my county meetings, representative government is a two-way street. Having dialogue gives me important feedback I need to help ensure government works for the people, not the other way around. The PPP administered by the Small Business Administration (SBA) is a good example. Congress took historic action to respond to the pandemic with passage of nearly $3 trillion in federal spending that included critical resources for public health and financial lifelines for individual Americans, farmers, small businesses and state and local governments harmed by the economic fall-out. The CARES Act created the PPP and authorized $349 billion in forgiveable loans with a clear and urgent purpose: to get funding into the hands of small business owners. Through no fault of their own, America’s small businesses had their revenue stream restricted for weeks on end, putting their livelihoods and payrolls in serious jeopardy. The PPP provided small and medium sized-businesses a financial relief valve to protect the paychecks and benefits for their workers and help with utilities, rent and other expenses to stay afloat until they were able to safely reopen for business. When the PPP ran out of money within two weeks, Congress took swift action to replenish the loan program with an additional $310 billion. After listening to feedback from small business people and community lenders in Iowa, I worked to secure greater flexibility for borrowers and maximize the effectiveness of PPP dollars. As small businesses begin to reopen their doors and get people back to work, we want to keep the momentum going in the right direction. In June, Congress passed the Paycheck Protection Flexibility Act to help borrowers cut through the regulatory weeds, give small businesses more leeway and make it easier for borrowers to qualify for full loan forgiveness.
- Extends time for borrowers to disburse their loan from eight weeks up to 24 weeks.
- Reduces requirement that 75 percent of PPP funds be used on payroll costs to 60 percent to qualify for forgiveness, allowing small businesses to spend up to 40 percent on operational expenses, such as rent, mortgage interest and utilities. Eligibility for partial loan forgiveness is an option for borrowers who spend at least 60 percent of the forgivable amount on payroll expenses.
- Extends deadline for borrowers who made payroll and wage reductions between Feb. 15 and April 26 to make adjustments and avoid reduced loan forgiveness to Dec. 31, 2020. If employers were unable to rehire workers for Covid-19 related reasons, borrowers also my avoid reductions in loan forgiveness.
- Defers loan repayments until the date on which their lender receives the forgiveness amount from the SBA.
- Provides more time to repay loans for those who don’t have full loans forgiven to five years for loans on or after June 5. Borrowers may work with lenders to extend the original two-year maturity window for loans prior to June 5.
- Includes payroll tax deferral to PPP borrowers through Dec. 31, 2020.
I’m also working to ensure red tape doesn’t get in the way of the economic recovery while still protecting taxpayer dollars. The Trump administration has signaled PPP loans above $2 million would be subject to greater scrutiny. I’ve heard from many lenders and borrowers in Iowa regarding an unnecessarily complex process to document loan forgiveness for amounts far less than that. The existing 11-page loan forgiveness application adds an extra burden to small businesses trying to get back up and running, including additional expenses for professional tax advice. That’s why I joined a bipartisan letter with 43 senators, requesting the Treasury Department and SBA revise and reduce the forgiveness application for loans under $250,000 to fit on one page.
Q: When is the deadline for small businesses to apply for the PPP?
A: Just a week after President Trump signed the CARES Act into law, the SBA launched the PPP. In less than 14 days, it processed 14 years’ worth of loans. By mid-June, more than 55,954 small businesses in Iowa qualified for $5 billion in forgiveable loans. It’s important to remember small businesses need to apply for loan forgiveness. Learn more about SBA’s revised loan forgiveness applications and instructions. The SBA also issued an easy loan forgiveness application for borrowers who are self-employed with no employees and for those who did not reduce employee hours or cut wages by more than 25 percent. Find the EZ PPP loan forgiveness application here. Small businesses who want to apply for PPP funds must do so by the deadline on June 30, 2020. I encourage Iowans to consult with your local lender to determine if the PPP’s new flexibility provisions are a good fit for your business.