As many of you know, in March Congress created the Paycheck Protection Program (PPP) to provide loans to qualified businesses. In the original law, an 8-week portion of those loan amounts were eligible for forgiveness. 

However, in response to challenges with using a PPP loan as well as the clear need for more flexibility as the public health crisis and its economic impact dragged on, Congress acted to create and pass the Paycheck Protection Program Flexibility Act (PPPFA), aka H.R. 7010 to enact changes to the PPP that allow it greater support employers and their employees.

DISCLAIMER: Please note that this article is not intended to, and does not, serve as legal advice to the reader but is for general information purposes only. Nothing in this article constitutes nor substitutes for specific legal advice that takes into account your organization’s specific jurisdiction(s) or circumstances. Please seek legal counsel if you need specific guidance. 


Key Provisions of the PPPFA


With the exemption of the extension of the maturity period, the legislation is retroactive and applies to all PPP loans made pursuant to the CARES Act.


PPP Loan Forgiveness


     - PPP loan forgiveness period is extended from 8 to 24 weeks from the date of the loan origination OR to December 31, 2020, whichever is earlier. However, those who already have PPP loans, can elect to maintain the 8-week forgiveness period.
     - Recognizing the realities of a slow-to-recover economy, the PPPFA includes new provisions that exempt a borrower from a reduction in the forgiven amount of the PPP loan if a borrower has difficulty rehiring employees or hiring new qualified employees to meet the employee retention threshold. The amount of the loan forgiven will not be impacted if the borrower has a reduction in the number of full-time equivalent employees IF the borrower can certify in good faith ONE of the following:
          - Documented inability to rehire employees who worked for the borrower on February 15, 2020;
          - Documented inability to hire similarly qualified employees for unfilled positions on or before December 31, 2020;
          - Documented inability to return to the same level of business activity as before February 15, 2020 due to standards established by HHS, the CDC, or OSHA from March 1-December 31, 2020 related to sanitation, social distancing, and other COVID-19 safety requirements.
     - The PPPFA modifies the 75%/25% CARES Act ratio and now requires that a minimum of 60% of the forgiven loan amount must be used toward payroll which allows for up to 40% of the forgiven amount to be used for other eligible forgivable expenses of rent, mortgage interest payments, utilities and the like.  The legislation does not change CARES Act parameters for how unforgiven proceeds of the loan must be used. 


PPP Loan Terms

     - The maturity period for PPP loans received after the PPPFA is enacted is extended from 2 years to 5 years. While the extended maturity period is NOT automatically retroactive for existing PPP loans, the legislation does allow borrowers and lenders to negotiate the maturity period of existing loans to conform with the 5-year maturity period provided by the PPPFA. 
     - The covered period of the PPP loan is extended from June 30, 2020 to December 31, 2020. The legislation maintains the requirement to rehire employees to be eligible for forgiveness, extends the safe harbor rehiring deadline to December 31, 2020. As noted above, there are also factors under which the rehiring requirements may be reduced in your case. 
     - The deferral date of the loan is extended. The CARES Act allowed for a 6-month deferral before payments towards the remaining PPP loan amount were required. Under the PPPFA, borrowers are now not required to make any loan payments until their loan forgiveness amount is determined by the SBA. If a borrower fails to apply for forgiveness within 10 months of the last day of the covered period of the loan, the borrower must start making payments of principal, interest, and fees beginning after 10 months of the last day of the covered period.
     - PPP borrowers who have the loans forgiven are now also eligible for deferring payroll taxes as per CARES Act. 

It is important to remember that these changes to the program will likely require the Small Business Administration (SBA) to rewrite some regulations that were promulgated in response to the CARES Act which created the program. Given that the PPPFA also makes changes to the forgiveness policy, please ask your lender to share the revised forgiveness application when it becomes available.

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