Flexibility Act Makes Major Changes in PPP

June 6, 2020

The Paycheck Protection Program Flexibility Act of 2020 (“PPPFA”), enacted on June 5, 2020, includes several changes to relief measures originally outlined in the Coronavirus Aid, Relief, and Economic Security (“CARES”) Act.

The PPPFA makes it easier for recipients of Paycheck Protection Program (“PPP”) Loans to qualify for forgiveness and amends many other details that have bedeviled borrowers nationwide. These amendments include:

  • Extended Maturity Date:  For loans made after June 5, 2020, borrowers will have a minimum of five (5) years to repay the loan. The original two (2) year maturity remains for loans received before June 5, 2020; however, the borrower and lender can agree to apply the new maturity guidelines;
  • Extended Forgiveness Period:  Borrowers now have 24 weeks, or until December 31, 2020, to use the PPP Loan. This applies to all loans; however, for loans made before June 5, 2020, the borrower can opt to keep the original eight (8) week schedule instead of extending;
  • Use of Proceeds:  Borrowers need to spend at least 60% of the loan on payroll, as opposed to the previous 75% requirement. The Department of Treasury has also said that if a borrower spends less than 60%, it will simply decrease the amount of forgiveness and not eliminate forgiveness completely;
  • Safe Harbor:  If a borrower can document its efforts in its inability to re-hire, the forgiveness amount will not be reduced if the borrower is unable to restore its full-time employee headcount.
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