Congress Makes Massive Changes To PPP Loan Forgiveness
Recently, Congress passed, and the President signed into law, the Paycheck Protection Flexibility Act (the “Flexibility Act”), which modifies the Paycheck Protection Program (the “PPP”) as set out in the original CARES Act.
The Flexibility Act replaces certain provisions of the PPP, while enhancing other PPP provisions. Significantly, the Flexibility Act makes the following changes to the PPP:
- Decreases the percentage amount of the PPP loan required to be used on payroll costs from 75% to 60%
- Increases the required time to spend the PPP loan from 8 weeks to 24 weeks
- Permits borrowers to use the new 24-week period to restore worker/wage levels to pre-pandemic levels necessary for full forgiveness
- Increase the years permitted to repay the loan from 2 years to 5 years
- Changes the deferral period for beginning to repay the loan from 6 months to 10 months after the last day of the covered period
- Reinforces prior SBA guidance regarding exemptions for reductions in loan forgiveness for businesses who 1) attempt to rehire employees when the employees refuse to return to work or 2) cannot find similarly qualified employees for unfilled positions
- Adds a new exemption for reductions in loan forgiveness for businesses who cannot rehire employees due to an inability to return to the same of level of business activity as a result of complying with various HHS and CDC social distancing guidance
The new law provides a welcomed change for many borrowers as it offers substantially greater flexibility. However, it is important to note that additional guidance will almost certainly be issued in the days to come. As such, it is recommended to regularly refer to our website where we are constantly posting content relating to all breaking PPP-related issues.
Also, on Thursday, June 11, 2020 at 12:15, I will be hosting a webinar discussing the latest PPP developments where I will be joined by Mountain Pacific Bank President Mark Duffy. A link to register for the webinar can be found here.