New Law Provides Flexibility to Small Businesses with PPP Loans
On June 5, 2020, President Trump signed into law the Paycheck Protection Program Flexibility Act of 2020 (“PPP Flexibility Act”), which modified certain provisions related to forgiveness of loans received under the Paycheck Protection Program (“PPP”), and allowed forgiveness recipients to defer their payroll taxes.
Specifically, the PPP Flexibility Act grants borrowers under the PPP the ability to extend the 8-week period to spend the PPP loan proceeds, and to qualify for forgiveness therefor, to 24 weeks (not to extend past December 31, 2020), thereby giving small business owners more time to qualify for such forgiveness, which appears directly in line with the original purpose of, and reasoning behind, the PPP. New borrowers also now have 5 years to repay the loan instead of 2, whereas existing PPP loans can be extended up to five years if the lender and borrower agree thereon, while the interest rate for PPP loans remains at 1%.
In addition to the spending deadline extension, the PPP Flexibility Act also decreases the original payroll expenditure requirement from 75% down to 60%, meaning that borrowers must spend at least 60% on “payroll,” or risk portions of (or, at worst, the entirety) of the loan not being forgiven.
Importantly, the PPP Flexibility Act extends the period during which borrowers must restore their number of full-time equivalent (FTE) employees, or certain salaries (or wages), from June 30, 2020, to December 31, 2020. However, the legislation includes two exceptions that allow borrowers to receive full loan forgiveness: the first exception being when the borrower cannot find qualified employees for unfilled positions; and the second exception being when the borrower cannot restore its operations to comparable levels of business activity due to social distancing, sanitation requirements, or customer safety needs.
Notwithstanding the above, the PPP Flexibility Act did not extend the deadline to apply for a PPP loan past June 30, 2020, though interested business owners are still encouraged to apply. The Act also does not ensure that more funds will become available for the PPP in any future legislation passed by Federal Government.
If you are a small business owner and would like to discuss your options relating to your eligibility for a PPP loan, please contact HoganWillig Attorneys at Law at 716-636-7600.
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