06/09/2020
Paycheck Protection Program Amendments
After passing with overwhelming bipartisan support in the House(*) and Senate, President Trump signed the Paycheck Protection Program Flexibility Act of 2020 into law on June 5, 2020. This Act makes several beneficial changes to the existing Paycheck Protection Program, including:
In calculating loan forgiveness, payroll must be at least 60% (down from 75%) and non-payroll items may be up to 40% (up from 25%).
The “covered period” in which to apply loan proceeds is extended from 8 weeks to 24 weeks, but not beyond December 31, 2020. Borrowers who received loans before the effective date of this change may elect to use the original 8 week period.
Before these amendments, forgiveness could be pro rated if the borrower had a reduction in full time employees (subject to certain exceptions) and did not return to the original headcount by June 30, 2020. Now, forgiveness will not be impaired if the borrower can document an inability to rehire the same or similarly qualified employees or to return to the same level of business activity. Presumably, these concepts will be fleshed out over time. In addition, where restoration would be a factor, the borrower has until December 31, 2020.
Before these amendments, loan payments need not begin until after a deferred period of between 6 and 12 months. Now, the deferral is until the borrower’s loan forgiveness amount is determined. If a forgiveness application has not been submitted within 10 months following the end of the applicable covered period, then payments may be required at that time.
Before these amendments, if a PPP Loan was not entirely forgiven, the payment term for the remainder was between 2 and 10 years, as set by lender and agreed by borrower. The minimum term is now 5 years, but this amendment applies only to loans made on or after the effective date of the amendment.
