What is the Paycheck Protection Program Flexibility Act?

On June 5, 2020, President Trump signed into law the Paycheck Protection Program Flexibility Act (PPPFA).  This law brings changes to the Paycheck Protection Program (PPP) that PPP loan borrowers should be aware of.

PPPFA changes the amount of funds to be spent on payroll to 60%

The PPFA reduces the amount of the loan to be spent on payroll costs from 75% to 60%. This means that more of the funds can be used to pay for eligible other expenses such as rent.

PPPFA extends the “covered period” from 8 to 24 weeks

The new law extends the “covered period” to 24 weeks or 12/31/2020, whichever comes first. 

PPPFA extends the June 30 deadline to rehire workers to December 31, 2020

Under the new law, businesses now have until December 31 to rehire workers in order for their salaries to count towards forgiveness.  This is especially a big win for businesses that had to shut down due to COVID-19.  

PPPFA allows for more exceptions if lost employees cannot be rehired

Borrowers will not be penalized if they can document that they tried to rehire staff, in good faith from 02/15/2020 – 12/31/2020.  There are also exceptions made if they are unable to return their FTE to former levels due to sanitation, social distancing, or other worker or customer safety requirements related to COVID-19.

PPPFA extends the repayment term from 2 years to 5 years

The terms for all new PPP loans will be five years at 1% interest to repay the remaining portion of the loan that was not forgiven.  This extension is not automatic for current borrowers but does allow lenders and borrowers to renegotiate the terms of any pre-existing PPP loans. 

PPPFA extends the loan repayment deferral period

The first loan payment is now deferred until six months after the SBA makes a determination regarding loan forgiveness.  This could mean that the first loan payment could be deferred to as late as May 2021.

PPPFA affects PPP loan forgiveness calculations

We expect to receive additional clarifications to how these changes affect loan forgiveness and for there to be an updated Paycheck Protection Program Loan Forgiveness Application released soon.

 For more information on the new changes to PPP, you can view the PPPFA bill in detail.