Paycheck Protection Flexibility Act of 2020: What You Need to Know

More changes are under way for those participating in the Paycheck Protection Program (“PPP”): on Wednesday, June3, 2020, the U.S. Senate passed the Paycheck Protection Flexibility Act of 2020. This Paycheck Protection Flexibility Act (H.R.7010) was passed via a voice vote, seemingly without any modifications. The next stop is the President’s desk for signature (which we assume he will sign):  Below is a summary outlining the highlights.

The Paycheck Protection Flexibility Act retroactively amended the PPP in the following ways:

  1. The PPP loan program is extended from June 30, 2020, until December 31, 2020, or until the program runs out of money;
  2. Any PPP loan that is not forgiven will have a 5-year minimum maturity;
  3. The definition of “Covered Period” (i.e., the previously defined as the 8 week period beginning on the date of funding and ending on the earlier of 24 weeks, or December 31, 2020;
  4. Employers will have until December 31, 2020 to rehire their employees, as opposed to the original date of June 30, 2020;
  5. Employers who can document that they are unable to both (i) rehire employees or (ii) hire similarly qualified employees will not have a proportional reduction in PPP loan forgiveness;
  6. Similarly, an employer that is able to document an inability to return to the same level of business activity as they had prior to 2/15/2020 due to compliance with requirements established or guidance issued by the Secretary of Health and Human Services, the CDC, or OSHA (e.g. compliance requirements related to maintenance of standards for sanitation, social distancing or any other worker or customer safety requirement related to COVID-19 during the period 3/1/2020 through 12/31/2020), will likewise not be penalized on their loan forgiveness application;
  7. Now 60% of the PPP loan must be used for payroll as opposed to the original 75% (some Senate members expressed concern that if the 60% threshold is not met, the entire loan will fall outside the requirements of the PPP resulting in immediate payback);
  8. A borrower that received a PPP loan prior to the enactment of the Act can elect to have their Covered Period end on a date that is 8 weeks after the date of the origination of the original loan (in comparing FTEs and payroll expense to pre-COVID-19 levels, an 8 week covered period may give some borrowers a better result and thus a smaller loan forgiveness reduction);
  9. Interest and principal payments are now deferred for a period of not more than a year, or until the forgiveness application is remitted to the lender (as opposed to the PPP’s original 6 month timeline);
  10. If a borrower does not apply for forgiveness within 10 months after the end of the Covered Period (now 24 weeks from loan funding unless the borrower elects to remain with the 8 week period), they must start making payments of principal, interest and fees;
  11. A PPP borrower is now eligible to defer payroll tax payments and participate in the PPP loan program; and
  12. The provisions of the Act are given retroactive treatment, as though they were included in the CARES Act (H.R.748).

Please contact Leslie Pesterfield at lpesterfield@omwlaw.com at Ogden Murphy Wallace, PLLC with any questions about the PPP, the Paycheck Protection Flexibility Act of 2020 or the CARES Act.