With an almost unanimous vote in both the House and Senate, President Trump recently signed into law the Paycheck Protection Program Flexibility Act of 2020 (the “Flexibility Act”). The Flexibility Act makes modifications to, and provided further guidance about, the PPP program Congress passed earlier this year. 

In particular, the Flexibility Act includes the following provisions:

  • The forgiveness period for PPP loans has been extended from 8 weeks to the earlier of either 24 weeks or December 31, 2020. Borrowers can still elect to use the 8-week period based on the date it received the PPP funds, meaning a Borrower need not wait until the end of the calendar year to apply for loan forgiveness.
  • For unforgiven loans, the loan maturity has been extended from two years to five years, but the interest rate remains at 1%.
  • Borrowers no longer need to allocate the loan amount in a 75/25 ratio related to payroll expense. The new ratio is 60/40 however Borrowers are now obligated to spend a minimum of 60% on payroll. If they fail to do so, none of the loan will be forgiven. 
  • Borrowers can use the 24-week period to restore their workforce levels and wages to the pre-pandemic levels required for full forgiveness. This must be done by Dec. 31, 2020 a change from the previous deadline of June 30.
  • The Flexibility Act now includes two additional exceptions allowing Borrowers to achieve full loan forgiveness even if they don’t fully restore their workforce. Previous guidance already allowed Borrowers to exclude from those calculations employees who turned down good faith offers to be rehired at the same hours and wages as before the pandemic. The two new exceptions are:
  • Inability to find qualified employees to perform the jobs required by the Borrower; and
  • Borrower is unable to restore business operations to Feb. 15, 2020, levels due to compliance with requirements established or guidance issued by the Secretary of Health and Human Services, the Director of the Centers for Disease Control and Prevention, or the Occupational Safety and Health Administration during the period beginning on March 1, 2020, and ending December 31, 2020, related to the maintenance of standards for sanitation, social distancing, or any other worker or customer safety requirement related to COVID–19.
  • Lenders can now defer principal and interest payments that may be required by a Borrower up to the date they receive the forgiveness amount from the SBA. Previously this time period was capped at six months.
  • Previously if a Borrower received a PPP loan, they were prohibited from taking advantage of the payroll tax deferral after their PPP loan was forgiven. The Flexibility Act removes this restriction, allowing Borrowers to take advantage of the payroll tax deferral from March 27 to Dec. 31, 2020. Borrowers can now defer all of its payroll tax burden to 2021 and 2022 even if the loan is forgiven before December 31, 2020.

For more information about recommended steps, please contact your Goosmann Law Firm relationship partner. We will continue to keep you apprised of relevant developments.

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