Paycheck Proctection Program Flexability Act
On Friday, June 5, 2020, President Trump signed into law the Paycheck Protection Program Flexibility Act of 2020. The PPP Flexibility Act provides some relief and flexibility in the use of the Paycheck Protection Program (“PPP”) funds.
- Borrowers can now choose to extend the original 8-week covered period for forgiveness to 24 weeks.
- To receive forgiveness, an eligible recipient must use at least 60% of the covered loan amount for payroll costs and may use up to 40% on any covered nonpayroll (mortgage interest, rent and lease expense, utilities) expenses. This is a change from the original 75% requirement and now includes a provision that if the 60% threshold is not met, none of the loan will be forgiven.
- Loan forgiveness will be determined without regard to a reduction in the number of full-time equivalent employees if the borrower, in good faith, can document:
- An inability to rehire individuals who were employees on February 15, 2020
- Inability to hire similarly qualified employees on or before December 31, 2020
- An inability to return to the same level of business activity that the business was operating before February 15, 2020, due to compliance with federal requirements or guidance related to COVID-19.
- For PPP loans issued after the bill became law, the maturity date of any unused PPP loan will be 5 years. There is also an option for existing PPP loans to modify the terms of maturity from the original 2-year period to the new five-year period.
- Recipients who do not apply for forgiveness will have ten months from the recipient’s last day of the covered period to begin making payments.
- PPP borrowers may now delay the payment of the employer portion of payroll taxes through December 31, 2020, rather than from the date of forgiveness.
Those who have not been able to reopen or are operating at reduced capacity because of social distancing guidelines (such as restaurants and bars) will benefit from the extended forgiveness period.
Let Us Help
Many of you are nearing the completion of your original 8 week covered period, therefore, planning for forgiveness should be a top priority. Please contact us with questions or to discuss your specific situation, as the rules can be complex and guidance is ever-changing. We will help you navigate through these difficult financial decisions.