President Trump on Friday signed a Paycheck Protection Program reform bill into law--and with it just gave millions of businesses some extra time to bulk up on staff.
Approval of the Paycheck Protection Program Flexibility Act, which unravels many of the PPP's more onerous restrictions, should make it easier for small-business owners to turn the loan into a grant that they don't have to repay.
Importantly, it gives businesses 24 weeks instead of eight to use the money, and reduces the requirement that they spend 75 percent on payroll down to 60 percent on payroll. That's good news for businesses. Here's why.
Businesses Can Take Time to Hire or Rehire Employees
Hiring people is difficult, and if you laid people off, these former employees should be your first choice to get your business going again. But if they don't want to come back or cannot come back, you'll need to find new people. With millions unemployed, this may seem easy, but finding the right people always takes time--even if everything goes smoothly.
If you don't need someone working yet, you can wait until you do need someone in the position. While many people are anxious to get back to work, if conditions aren't right for reopening, bringing everyone back doesn't make a whole lot of business sense. If you bring them back too soon, you may have to lay them off (or furlough them) again. That isn't helpful for anyone.
The Percent Used for Payroll Drops to 60 Percent
The old number was 75 percent, and this 15 percent drop can mean great things for small businesses. Instead of getting people in right away, more of the money can go toward your expenses, such as mortgage payments and rents. The bulk of the money still goes to your employees, but you have the gift of time to get things up and running.
Again, this gives you flexibility in hiring and retaining people. If someone quits, you don't have to make a mad dash to the recruiter to find someone immediately. You can take the time to find a proper replacement.
Hiring is always a difficult part of running a business, and the terms of the original PPP put pressure on companies to act quickly. Hopefully, these changes will allow business owners the flexibility they need to protect their businesses and provide jobs for years to come. President Trump is expected to sign it.