Paycheck Protection Program Flexibility Act (HR 7010) was signed into law on June 5, 2020. This bill modifies provisions related to the forgiveness of loans made to small businesses under the Paycheck Protection Program implemented in response to COVID-19.
Details of the bill below:
- Extends the PPP loan forgiveness period to include costs incurred over 24 weeks after the loan is issued (or through 12/31/20 – whichever comes first). Those businesses who received a loan prior to passage of this bill can choose to keep the 8-week forgiveness window under the original program structure.
- Extends from June 30, 2020 to December 31, 2020 the date by which businesses must restore staffing or salary levels previously reduced in order to have the full loan amount forgiven. This provision applies to worker and wage reductions made from February 15 through 30 days after enactment of the CARES Act (3/27/20).
- Allows forgiveness amounts to be maintained for companies that can document their inability to rehire workers employed who were employed as of February 15 or their inability to find similarly qualified workers by the end of the year. Likewise, forgiveness amounts can be maintained if business can show that they could not resume business levels from before February 15 because they were following federal requirements for sanitization or social distancing.
- Extends the deadline to apply for a PPP loan from June 30, 2020 to December 31, 2020.
- Lowers the required percentage of forgiven loan amounts that come from payroll expenses from 75% to 60%.
- Repeals a provision from the CARES Act that barred companies with forgiven PPP loans from deferring their payroll tax payments.
- Allows borrowers to defer principal and interest payments on PPP loans until the SBA compensates lenders for any forgiven amounts (rather than the previous 6-month deferral period). Borrowers that don’t apply for forgiveness would be given at least 10 months after the program expires to start making payments.
- Changes from 2 years to 5 years the minimum loan maturity period following an application for forgiveness. However, this only applies to PPP loans issued after enactment of this bill, though borrowers and lenders can agree to extend current loans.