Paycheck Protection Program Flexibility Act

On June 5, 2020 President Trump signed into law the Paycheck Protection Program Flexibility Act (PPPFA) (https://home.treasury.gov/news/press-releases/sm1026).  Revised loan applications and forgiveness applications are expected, and we will alert you when these are available. 

The PPPFA modifies five aspects of the PPP:

  1. Reduces amount required to spend on payroll from 75% to 60%.  
    • You may now spend up to 40% of the proceeds on non-payroll costs, however non-payroll costs are still limited to rent, mortgage payments, utilities, and interest on loans.
    • The Treasury further clarified that if you use less than 60% of the loan for payroll you will still be eligible for partial forgiveness, but at least 60% of the forgiveness amount must have been used for payroll costs.
  2. Extends the time period to use funds from 8 weeks to 24 weeks.  Borrowers can choose to use their original covered period instead of utilizing the extended period set out in the PPPFA.
  3. Eases repayment terms for any portion of the loan not forgiven.  Specifically:
    • New loans: repayment term of five years.
    • Existing loans: repayment term may be extended to five years if lender agrees.
    • First payment will be deferred until six months after the SBA makes a determination on forgiveness. If you have not yet applied for forgiveness at 10 months past your covered period, your payments will start at that point.
  4. Extends the deadline to restore your workforce’s level of pay.
    • The original PPP stated that forgiveness would be reduced if there were reductions to your workforce or their pay.  Pay during the covered period must be at least 75% of what the employee made in the most recent full quarter before your covered period.
    • Originally, if you restored the numbers by June 30, 2020 your forgiveness would be restored as well.  
    • The PPPFA extends that deadline.  Businesses now have until December 31, 2020 to rehire workers and their level of pay.
  5. Extends deadline to restore number of employees.  
    • Is unable to rehire an individual who was an employee of the eligible recipient on or before February 15, 2020;
    • Is able to demonstrate an inability to hire similarly qualified employees on or before December 31, 2020; or
    • Is able to demonstrate an inability to return to the same level of business activity as such business was operating at prior to February 15, 2020.
    • The original PPP stated that forgiveness would be reduced if you maintain a lower average number of full-time equivalent employees during your covered period as compared to a choice of prior periods (either 2/15/19 – 6/30/19 or 1/1/20 – 2/29/20).
    • Originally, if you restored the numbers by June 30, 2020 your forgiveness would be restored as well.
    • The PPPFA extends that deadline.  Businesses now have until December 31, 2020 to restore the average number of full-time equivalent employees.
    • The PPPFA also provides exceptions for cases in which a business:

We are here to assist you if you have questions, would like help applying for forgiveness, or need help planning for the best use of these funds.