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:
- 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.
- 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.
- 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.
- 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.
- 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.