The Paycheck Protection Program and Flexibility Act Impact

According to the latest report from the US Small Business Administration, more than 4.5 million businesses were approved for loans through the Paycheck Protection Program (PPP) as of June 12, with the total amount funded coming in around $512.3 billion. There is an estimated $129.8 billion of funding remaining in the program.

ITR Economics’ analysis indicates that the PPP money, along with other actions by the Fed and the provisions of the CARES Act, is mitigating the black swan-induced recession currently impacting the US economy. Since the inception of the PPP, the stipulations for how and when its funds are to be used have evolved. The PPP Flexibility Act, which President Trump signed into law June 5, addresses many businesses' concerns regarding the PPP funds by:

• Extending the PPP forgiveness timeline for using the money from 8 to 24 weeks.
• Extending the PPP forgiveness period for restoring staffing or salary levels to Dec 31, 2020.
• Maintaining forgiveness amounts if companies are unable to rehire workers or find similarly qualified workers by the end of the year.
• Reducing the 75% payroll requirement to 60%.
• Allowing new borrowers five years to repay the loan instead of two. Existing PPP loans can be extended up to five years if the lender and borrower agree. The interest rate remains at 1%.

These changes are a welcome development for businesses that have already taken advantage of the program. For those companies that have not, a limited time remains. Nearly $130 billion in financing is still available, through the end of June. If you would like to discuss this or other strategies for dealing with the economic headwinds of today while positioning your business for the next rising trend, please reach out to us. We’re here to help!