UPDATE 06/05/2020
President Trump signed the PPP Flexibility Act into law.
The provisions of this legislation are:
- Current PPP borrowers can choose to extend the eight-week period to 24 weeks, or they can keep the original eight-week period. New PPP borrowers will have a 24-week covered period, but the covered period can’t extend beyond Dec. 31, 2020.
- PPP borrowers must spend at least 60% on payroll or none of the loan will be forgiven. This replaces the 75% threshold that allowed for a reduction of a portion of the loan if the 75% threshold was not met. The co-sponsors of the bill in the House intended the sliding scale to remain in effect at 60%. Slight changes could be made to the bill to restore the sliding scale.
- Borrowers can use the 24-week period to restore their workforce levels and wages to the pre-pandemic levels required for full forgiveness. This must be done by Dec. 31, a change from the previous deadline of June 30.
- The legislation includes two new exceptions allowing borrowers to achieve full PPP loan forgiveness even if they don’t fully restore their workforce. Previous guidance already allowed borrowers to exclude from those calculations employees who turned down good faith offers to be rehired at the same hours and wages as before the pandemic. The new bill allows borrowers to adjust because they could not find qualified employees or were unable to restore business operations to Feb. 15, 2020, levels due to COVID-19 related operating restrictions.
- New borrowers now have five years to repay the loan instead of two. Existing PPP loans can be extended up to 5 years if the lender and borrower agree. The interest rate remains at 1%.
- The bill allows businesses that took a PPP loan to also delay payment of their payroll taxes, which was prohibited under the CARES Act.
- Extends the deferral period before loan payments begin from a fixed 6 months to the time at which a final forgiveness decision is rendered by the SBA. For borrowers who do not seek forgiveness, the deferral period lasts 10 months.
05/28/2020
The House passed HR 7010 the Paycheck Protection Program Flexibility Act on Thursday, May 28th, with a vote of 471-1. The Senate will now decide whether to take up HR 7010 or present its own bill regarding flexibility for the Paycheck Protection Program.
