Paycheck Protection Program Flexibility Act
On Wednesday, June 3, 2020, the Senate passed the Paycheck Protection Program Flexibility Act of 2020. The PPP Flexibility Act passed the House last week and will now be sent to President Trump for signature into law. The PPP Flexibility Act provides some relief and flexibility in the use of the Paycheck Protection Program (“PPP”) funds.
- The spending period of 8 weeks is extended to 24 weeks after the loan funding date or December 31, 2020. Borrowers who received their PPP loan prior to the enactment date of the legislation can elect to use their original 8-week forgiveness period.
- Borrowers must spend at least 60% of the PPP loan amount on eligible payroll costs, and may use up to 40% on any nonpayroll (mortgage interest, rent and lease expense, utilities) expenses. This is a change from the original 75% threshold; however, the 60% threshold must be met or none of the loan is eligible for forgiveness.
- Loan forgiveness will be determined without regard to a reduction in the number of full-time equivalent employees if the borrower, in good faith, can document:
- An inability to rehire individuals who were employees on February 15, 2020.
- Inability to hire similarly qualified employees on or before December 31, 2020.
- An inability to return to the same level of business activity that the business was operating before February 15, 2020, due to compliance with federal requirements or guidance related to COVID-19.
- New loans have a maturity of five years on any balance not forgiven. Existing loans can be extended from two to five years, if lender and borrower agree.
- Recipients who do not apply for forgiveness will have ten months from the recipient’s last day of the covered period to begin making payments.
Those who have not been able to reopen or are operating at reduced capacity because of social distancing guidelines (such as restaurants and bars) will benefit from the extended forgiveness period.
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Please contact us with questions or to discuss your specific situation. We will help you through these difficult financial decisions.