PPP Flexibility Act News Update

On June 5, 2020, President Trump signed into law the Paycheck Protection Program Flexibility Act (PPPFA) in an attempt to address many concerns expressed by the small business community around the Paycheck Protection Program (PPP) aimed at providing COVID-19 relief.

The new law addresses the following flaws in the original PPP program created under the CARES Act:

1. The PPPFA reduces the amount of the loan needed to be spent on payroll from 75% to 60%, thus increasing the amount of funds available for other expenses from 25% to 40%.
   
   
2. The PPPFA extends the time period to spend the loans from 8 weeks to 24 weeks. While businesses will still need to spend the money on payroll and authorized expenses, they now have until the end of 2020 to do so.
   
   
3. Under the new law, businesses now have until December 31, 2020, to rehire workers so their salaries will count towards forgiveness.
     
4. To help remedy the problem with high unemployment benefits and other issues preventing businesses from being able to get employees back to work, the PPPFA adds additional exceptions for a reduced headcount. The law states business can still receive forgiveness on payroll amounts if it:
   
   
   • 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
   • It is able to demonstrate an inability to return to the same level of business activity as such business was operating prior to February 15, 2020.
     
     
5. A business now will have five, instead of two, years at 1% interest to repay the unforgiven portion of a loan.  Further, the first payment will be deferred for six months after the SBA makes a determination on forgiveness. Since under current regulations your bank has 60 days to make a forgiveness determination and the SBA an additional 90 days, this means borrowers could have up until May of 2021 to make the first payment on the loan.

Learn more and find resources about the Paycheck Protection Program here.