The Paycheck Protection Program Flexibility Act of 2020 (PPPFA) is intended to make it easier for Borrowers to maximize loan forgiveness.
Below are highlights from the new legislation:
- Extends covered period for PPP loan forgiveness. The PPPFA extends the covered period from 8 weeks to the earlier of 24 weeks or December 31, 2020. Borrowers who received loans before enactment can choose to extend the 8-week period or keep the original 8-week period.
- Extends safe harbor deadlines. The PPPFA allows Borrowers until December 31, instead of June 30, to restore any reductions in salaries or hourly wages, or full-time equivalency levels.
- Increases PPP loan maturity. The bill establishes a minimum loan maturity of 5 years (up from 2 years) on remaining balances of PPP loans.
- Reduces payroll costs requirement to 60%. Under the PPPFA, in order to receive loan forgiveness, a Borrower must use at least 60% – down from 75% – of the covered loan amount for payroll costs. We expect to see additional clarification from the Treasury or SBA on how this will change the forgiveness calculation form, or whether the sliding scale will remain in effect. (Previously Borrowers had to choose the smallest of three potential forgiveness amounts, of which the payroll cost requirement was one.)
- Amends loan forgiveness FTE exemption. The PPPFA amended the guidance to add exemptions from full-time equivalent (FTE) reductions in loan forgiveness if Borrowers: a) are able to document an inability to re-hire or hire qualified employees, or b) are able to document an inability to return to the same level of business operations as of February 15, 2020 due to compliance with COVID-19 restrictions.
- Delay of payment of employer payroll taxes. The new legislation allows a PPP Borrower to utilize the deferral of the employer’s portion of Social Security taxes (provided under Sec. 2302 of the CARES Act) regardless of loan forgiveness. Previously, Borrowers could only utilize the deferral though the date their lenders issued a decision on PPP loan forgiveness.
The PPP loan program still has funds available! You can view a list of participating lenders HERE.