Paycheck Protection Program Flexibility Act of 2020

Paycheck Protection Program Flexibility Act of 2020

On June 5, 2020 the Paycheck Protection Program Flexibility Act was signed by the President, which provides a number of changes to the PPP.

According to the National Association of Government Guaranteed Lenders (NAGGL), the Paycheck Protection Program Flexibility Act of 2020 includes the following provisions: 

  • Providing additional flexibilities to change the 75%-25% breakdown of payroll to non-payroll expenses to 60%-40%.
  • Extend the origination period from June 30, 2020 to December 31, 2020.
  • Extend the 8-week period to 24 weeks, permitting any borrower to choose to use the originally authorized 8- week period. 
  • Extend the deferral period to be pegged to the date at which the forgiveness amount is remitted to the lender, or 10 months after the end of the 24-week period.
  • Allow borrowers with forgiven loans to defer payroll taxes, effectively overruling a prior IRS decision to the contrary. 
  • Expand the safe harbor for rehiring employees by allowing that the forgiveness will not be affected by a reduction in employees if the borrower is able to document an inability to rehire individuals, to hire similarly qualified employees, or to return to the same level of business activity as it was operating at before February 15, 2020.
  • Extending the loan maturity minimum to 5 years for all loans on a go-forward basis. Any pre-existing loans may amend the note to reflect new maturity terms if both the lender and borrower mutually agree.
  • Except for the maturity minimum, all changes apply to new and existing loans. 

These changes will hopefully be welcome news for many borrowers in need of greater flexibility.  In the meantime, there are still questions within the Act that need to be clarified by the U.S. Small Business Administration and the Treasury Department, including guidance for PPP lenders. 

We will post updated news and information as we learn more.