How the new rules of the pay protection plan help small business owners

Small business management administrator Jovita Carranza announced the "Salary Protection Plan" in the East Room of the White House in Washington, DC on Tuesday, April 28, 2020. | Jabin Botsford/The Washington Post/Getty Images

There is now more flexibility in how loans are used.

The Paycheck Protection Program (Loan Protection Program) is designed to help small businesses survive the recession during the pandemic, and the plan has some flexibility. New rules. These changes have been approved by Congress through the Payroll Protection Plan Flexibility Act, which was passed earlier this month, and are designed to make it easier for business owners to obtain relief and increase the effectiveness of the plan.

Vox aims to help small business owners navigate these changes.

In an update: Business owners now have more leeway in spending loans. In the past, payees had to use 75% of PPP loans to pay their salaries in order to avoid all loans. This restriction ultimately caused trouble for thousands of business owners who needed large amounts of funds for other expenses.

This rule is consistent with the original goal of the plan. The rule is designed to help companies maintain their employees’ Salary level: However, the Small Business Administration (SBA) strictly adheres to the 75% standard in place, not the legislator. In addition, since the plan has been launched, lawmakers received a lot of feedback from small business owners, calling on them to adopt greater flexibility in lending because they need as much help as other expenses to maintain. Especially for small businesses, their operating costs can be compared with wage expenses.

The new policy lowered the initial SBA threshold and required recipients to devote 60% of their loans to wages. In addition, this will allow business owners more time to spend these loans: Previously, the money had to be used within an eight-week period, but now it can be used within 24 weeks of obtaining the loan.

The new law has not been resolved, including the lack of transparency in the demographics of business owners who obtain PPP loans. But the core of these changes is to help small business owners better address the deficiencies suffered by coronaviruses. If these updates are not implemented, a report by the Inspector General of the Small Business Administration found that the limitations of the plan, especially its rules on loan forgiveness, may cause more payees to assume debt.

In this regard, the changes in the new law are concise and brief

Due to concerns that many business owners have expressed concerns about loan restrictions, Congress passed the Payroll Protection Plan Flexibility Act earlier this month, President Donald Trump Soon afterwards it was signed into law.

"In the past few months, thousands of our small businesses have heard that the rigid structure of PPP cannot meet their needs, and 80% of business owners in our network are worried that under the current rules, their loans may not Will be forgiven." said John Arensmeyer, CEO of Small Business Majority. Small business advocacy group.

Concerns about loan waivers may even cause business owners to be reluctant to apply for PPP ports: Although the first funds of the plan were used up within two weeks, the second funds approved by Congress have not yet been fully used.

All updates to the law apply to companies that obtain new PPP loans after or after June 5th; only part of them apply to those who have already received PPP support. The following is a brief description of the impact of the law on the plan and the beneficiaries:

  • More time is spent on PPP funds: Business owners initially have 8 weeks to use PPP funds. This time frame has been extended to 24 weeks. As of now, the deadline for spending funds is December 31, 2020, or 24 weeks after receiving the loan. This update reflects the persistence of the recession, which is expected to continue into the first few months of the pandemic . This change applies to new and existing PPP loan holders.
  • The relaxation requirements for restrictive loans are low: Business owners must use 75% of their PPP loans for payroll so that they can be fully forgiven, and now they only need to use 60% of the funds for Such fees. This means that companies can now spend more money on other operational needs, including rent. This change applies to new and existing PPP loan holders.
  • More flexibility in rehiring employees: Small businesses must rehire "full-time equivalent" employees who were fired until June 30, 2020 to be eligible for full loan forgiveness under the original legal requirements. Since many companies have not reached the level before the pandemic, and some employees may not want to resume their original work due to health problems, the deadline for hiring full-time employees has been changed to December 31, 2020. [19659017] The law also exempts business owners if they can prove that they have tried to fulfill this requirement and are unable to re-employ past or new employees who are eligible for the position, they do not need to meet the re-employment requirements. Because they comply with coronavirus-related policies, they are financially different. This change applies to new and existing PPP loan holders.

    • There is more time to repay loans: For business owners who do not exempt all their loans, the law extends the time they must repay these loans. The initial maturity date of PPP loans is two years, and it has now been changed to five years. This change automatically applies to new PPP recipients who obtain a loan on or after June 5, but existing PPP loan holders can also try to reach an agreement with the lender.
    • Another option for tax deferral: The Act ensures that business owners benefiting from PPP loans can postpone this year’s payroll tax obligations.​​ This change applies to new and existing PPP loan holders.

    In this recently implemented law, the Small Business Administration rules also make it easier for people who have been convicted of crimes in the past to use the procedure. The procedure initially prohibited individuals who were convicted of felony in the past five years from obtaining loans, and depending on the felony, the time window has now been shortened to one year.

    There are many laws that do not solve

    One of the central issues of PPP is that many small businesses, especially those run by ethnic minorities and women, lack access to them during the implementation process.

    According to the estimate of the responsible loan center, the plan was released after the first round of PPP funds were exhausted. Up to 90% of the enterprises run by ethnic minorities and women may be excluded from the plan. As CRL pointed out in a recent statement, the new PPP repair method did not address the gap in the demographic data collection of borrowers using the program.

    Another bill approved by Congress, the Salary Protection Plan and Health Care Act, attempts to resolve these differences by allocating more funds to community financial institutions, which are providing business owners of color Service has a better record.

    There are still concerns that the plan does not fully serve some of the smallest companies, however. Senators Kamala Harris, Cory Booker and Steve Daines proposed legislation that will further target small businesses, especially by underrepresentation Of companies (including black Americans) provide funding.

    The HEROES Act was approved in the House of Representatives, and this problem can also be solved by establishing a fund allocation for companies with 10 or fewer employees. However, the Senate has suspended the passage of other stimulus measures, and lawmakers will not consider considering the stimulus measures until after the July 4 recess.

    Allen Mayer, the head of the small business majority, emphasized the urgency of approving more aid.

    "The next stage of assistance must include a bold direct grant program for companies with fewer than 100 employees and automatic PPP forgiveness for all loans under $150,000." Emphasize. "Simply think that the one-time loan plan is short-sighted and will put the United States in trouble after 2030."

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