PPP Flexibility Act

Posted June 2020

The Paycheck Protection Program (PPP) Flexibility Act, making critical changes to the PPP loan rules, has been signed.

8-week period extended to 24-week
PPP loan borrowers can now choose to have 24 weeks, rather than 8 weeks, to spend funds received in order to qualify for forgiveness. The deadline to use funds is 24 weeks from the date the loan funded or December 31, 2020, whichever comes first.

75% payroll rule reduced to 60%
Initially, 75% of funds had to be used for payroll, with the remaining funds being used for rent, mortgage interest, utilities and other qualifying expenses.  Now, a minimum of 60% must be used for payroll to qualify for forgiveness, and the remaining 40% can be used for the other qualifying expenses.

The bill stated that if the 60% or greater threshold is not met, none of the loan will qualify for forgiveness. However, on Monday, June 8, the U.S. Small Business Administration (SBA) and Treasury stated that borrowers can qualify for partial loan forgiveness if less than 60% of the PPP loan is used for payroll.

Extended date to restore employee count
Businesses have an additional six months, until December 31, to get workforce levels back to 75% of the February 15, 2020 full-time equivalent employee count. However, if there are reasons related to COVID-19 that qualified employees cannot be found or a business cannot return to pre-February 15 levels, the new bill allows for adjustments to the loan.

Extended loan terms
For any funds that are not forgiven, businesses with loans signed after June 4 now have five years to repay the loan, rather than two years. PPP loans signed prior to June 5 are eligible to be renegotiated.  The interest rate remains unchanged at 1%. The new bill allows for a deferral of repayment until the lender receives the forgiveness amount from the SBA, if application is made within 10 months after the end of the covered period.

Please contact us if you have any questions or would like to discuss forgiveness calculations for your business.