PPP Flexibility Act signed into Law

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On June 5, 2020, the President signed the Paycheck Protection Program Flexibility Act, H.R. 7010 into law.  The Act eases rules around how small businesses may use the Payroll Protection Program (“PPP”) Loan funds. 
 
Key changes under the Act include:       

  • The deadline for spending PPP funds would be extended from eight weeks to 24 weeks or December 31, 2020, whichever is earlier.  

  • Payroll costs need only constitute 60% of the PPP funds rather than the original 75% threshold to be eligible for forgiveness.

  • The original June 30, 2020 deadline to rehire workers who were laid off is postponed to December 31, 2020.

  • Borrowers may achieve full forgiveness if they cannot restore their previous workforce because they were unable to restore business operations to pre-Covid-19 levels.

  • The amount of loan forgiveness will be determined without regard to a proportional reduction in the number of full-time employees if:

    • an eligible recipient can demonstrate a) an inability to rehire individuals who were employees on February 15, 2020; and (ii) an inability to hire similarly qualified employees for unfilled positions on or before December 31, 2020.

    • the borrower cannot return to its February 15, 2020 level of business activity due to compliance with government (CDC, OSHA, etc.) guidelines related to the maintenance of standards for sanitation, social distancing, or any other worker or customer safety requirement related to COVID–19.

  • The PPP loan term is extended from 2 years to 5 years.

  • The deferral period for the loan is extended from 6 months to a) 10 months after the last day of the covered period if you do not apply for forgiveness, or b) the date that the amount of forgiveness is determine.

  • PPP borrowers who applied for loan forgiveness may delay the payment of payroll taxes.

These changes give borrowers more freedom in how and when to spend their PPP funds while remaining eligible for PPP loan forgiveness.

PPP borrowers should keep in mind that with this new Act components of the previously released SBA guidelines and forgiveness forms will have to be modified.  The firm will continue to keep you updated on new PPP guidance.

As you face the day to day questions of balancing business concerns, the law, and health and safety, the firm is here to assist in any way we can.