On June 5, 2020, the Paycheck Protection Program Flexibility Act (the Act) was signed into law. The Act is intended to provide additional flexibility on the use of Paycheck Protection Program (‘PPP’) funds in order to give borrowers the opportunity to maximize forgiveness. The Act implements several important changes to the PPP, some of which are summarized below…
The SBA has announced that it will soon publish a revised version of its PPP loan forgiveness application (here is the interim rule), as well as revised rules and procedures concerning loan forgiveness. Please keep in mind that the information below is subject to change based upon further guidance from the SBA:
- Extension of the Covered Period for loan forgiveness from eight weeks after the date of loan disbursement to 24 weeks after the date of loan disbursement, providing substantially greater flexibility for borrowers to qualify for loan forgiveness. Borrowers who have already received PPP loans retain the option to use an eight-week covered period.
- Lowering of the requirements that 75 percent of a borrower’s loan proceeds must be used for payroll costs and that 75 percent of the loan forgiveness amount must have been spent on payroll costs during the 24-week loan forgiveness covered period to 60 percent for each of these requirements. If a borrower uses less than 60 percent of the loan amount for payroll costs during the forgiveness covered period, the borrower will continue to be eligible for partial loan forgiveness, subject to at least 60 percent of the loan forgiveness amount having been used for payroll costs.
- Provision of a safe harbor from reductions in loan forgiveness based on reductions in full-time equivalent employees for borrowers that are unable to return to the same level of business activity the business was operating at before February 15, 2020, due to compliance with requirements or guidance issued between March 1, 2020 and December 31, 2020 by the Secretary of Health and Human Services, the Director of the Centers for Disease Control and Prevention or the Occupational Safety and Health Administration, related to worker or customer safety requirements related to COVID–19.
- Provisions of a safe harbor from reductions in loan forgiveness based on reductions in full-time equivalent employees, to provide protections for borrowers that are both unable to rehire individuals who were employees of the borrower on February 15, 2020, and unable to hire similarly qualified employees for unfilled positions by December 31, 2020.
- Extension of the deferral period for borrower payments of principal, interest and fees on PPP loans to the date that SBA remits the borrower’s loan forgiveness amount to the lender (or, if the borrower does not apply for loan forgiveness, 10 months after the end of the borrower’s loan forgiveness covered period).
For more COVID-19 information,
see our posts Resources and Response Framework.