The Paycheck Protection Program (PPP) is about to get an upgrade.
President Trump today approved the Paycheck Protection Program Flexibility Act (H.R. 7010), which addresses several problems with the CARES Act initiative.
After its initial introduction within the CARES Act in March, the PPP (designed to incentivize small businesses to keep employees on its payroll with low-interest, forgivable loans) experienced its fair share of glitches and featured inflexible provisions that proved problematic for borrowers. Additionally, the program ran dry just two weeks after its launch.
In the travel industry specifically, advisors applying for PPP loans were often stuck playing the waiting game as the SBA struggled with an overwhelming number of applications. Loan approvals remained low even after the PPP was replenished with funds in late April.
The American Society of Travel Advisors (ASTA) has been fighting for amendments to the PPP since it was introduced, and many of its priorities are listed within the new PPP Flexibility Act.
“We commend the Senate for passing the Paycheck Protection Program Flexibility Act (H.R. 7010), which would change PPP loan terms — in some cases retroactively — in a number of ways ASTA has advocated for,” said Eben Peck, executive vice president of advocacy for ASTA, in a statement. “While the PPP will remain complex, this bill gives more flexibility to PPP recipients and increases the chances that loans can be fully forgiven.”
While the PPP will remain complex, this bill gives more flexibility to PPP recipients and increases the chances that loans can be fully forgiven.
Here are key amendments under the Paycheck Protection Program Flexibility Act
- The bill establishes a minimum maturity of five years for a PPP loan (formerly, this maturity period was two years).
- The bill extends the covered period — during which a loan recipient may use such funds for certain expenses while remaining eligible for forgiveness — to 24 weeks (from eight weeks).
- The bill raises the non-payroll portion of a forgivable covered loan amount from the current 25% up to 40%.
- The bill allows employers to now hire back employees by the end of the year and still receive forgiveness (previously, staff had to be re-hired by June 30).
- The bill revises the deferral period for PPP loans, allowing recipients to defer payments until they receive compensation for forgiven amounts. Recipients who do not apply for forgiveness have 10 months from the program's expiration to begin making payments.
- The bill eliminates a provision that makes a PPP loan recipient who has such indebtedness forgiven ineligible to defer payroll tax payments.
RELATED: The U.S. State Department Needs to Resume Passport Processing ASAP, Says ASTA
The U.S. Travel Association applauds the passing of the bill, calling the changes “another important step in providing relief to small businesses that otherwise will not survive until the economic recovery phase.”
One of the most crucial changes, according to Tori Emerson Barnes, executive vice president of public affairs and policy for U.S. Travel, is the modification to the portion of funds related to non-payroll expenses (which may include mortgage, utilities and more).
"[Travel-related small businesses] have comparatively high capital overhead, but virtually zero incoming revenue because of the necessary measures in place to stem the spread of the pandemic,” she said in a statement.
However, the work on this program is far from done, she added.
“While this measure does a good job making the PPP work better for businesses that are eligible, other PPP enhancements will be needed to make sure all the key pieces are in place when the recovery begins — in particular, extending eligibility to non-profit and quasi-governmental entities that are vital drivers of local and regional economic development,” Emerson Barnes said. "We urge leaders to move urgently to enact the next phase of coronavirus response legislation, which is absolutely vital to the future of the travel and tourism industry, and to prioritize expanding eligibility to those most hard hit by this pandemic such as destination marketing organizations.”
The Details
American Society of Travel Advisors
www.asta.org
U.S. Travel Association
www.ustravel.org
