Paycheck Protection Program Flexibility Act – June 5, 2020 Update

On Wednesday, June 3, the Senate passed the House version of the Paycheck Protection Program Flexibility Act of 2020.  As its name suggests, the legislation is intended to give borrowers more flexibility by extending the amount of time to spend PPP funds and by relaxing other requirements. The bi-partisan legislation is expected to be signed by President Trump.

Here is a summary of the main provisions of the new legislation:

  • The default 8-week timeline for spending PPP funds is extended to 24-weeks.  This will give many borrowers a better opportunity to obtain full forgiveness, especially those who have been forced to shut down or operate at reduced levels.  Borrowers may elect to use the original 8-week timeline instead of the extended 24-week timeline.
  • The requirement for payroll expenses to be at least 75% is reduced to 60%.   However, there is a catch –  If payroll expenses are less than 60%, none of the loan will be forgiven.
  • Borrowers can use the entire 24-week timeline to restore their FTE counts to required pre-pandemic levels.  The safe-harbor date is extended from June 30 to December 31.
  • There are 2 new exceptions to the FTE requirement for borrowers who are unable to restore FTE levels:
    • If they cannot find similarly qualified employees, or
    • If they are unable to restore business operations back to pre-pandemic levels due to compliance with requirements related to sanitation, social distancing, or other customer or employee safety requirements.
  • The repayment timeline is extended to 5 years instead of 2 for new borrowers.  For existing loans, the extension from 2 years to 5 years can be made upon mutual agreement of the borrower and lender.
  • PPP recipients are now eligible for the payroll tax deferral provided in the CARES Act, which was previously prohibited.

As we have experienced several times in recent months, each new set of rules or law changes brings a brand-new set of questions!  We expect the SBA will publish additional guidance in the coming days or week, along with an updated forgiveness application.  

Look for us to announce a date and time for our next PPP webinar soon.  As always, if you have questions or need assistance please let us know.