June 8, 2020
The U.S. Government has just signed into law the Paycheck Protection Program Flexibility Act of 2020 with several important updates to the existing PPP program giving borrowers increased flexibility to spend and obtain loan forgiveness.
These updates are summarized as follows:
One aspect of the legislation allows PPP borrowers to apply for a 24-week period (so, approximately 6 months) in which PPP funds may be used and repayment forgiven – three times longer than the original 8 week period. This recognized that many Small Businesses remained closed well after receipt of PPP funds.
A second aspect of the legislation reduces to 60% the portion of PPP funds required to be applied toward payroll costs, allowing up to 40% to be used toward certain non-payroll costs, including mortgage interest, rent, and utilities.
A third aspect of the legislation recognizes that, while PPP loan forgiveness was intended for employers to maintain employees on the payroll, certain employees may refuse to return to work, or it may be difficult to hire similarly qualified employees. Thus, borrowers may be able to obtain loan forgiveness if they can document the inability to rehire employees or hire substitute employees.
A fourth aspect of the legislation allows loan forgiveness when borrowers reduce employees due to the inability to return to prior levels of business activity from complying with CDC and other applicable health and safety requirements.
A fifth aspect defers payment of certain employer payroll taxes.
Finally, to the extent PPP borrowers may not qualify for loan forgiveness, the legislation substantially increases the time for repayment, from 2 to 5 years.
The U.S. Government continues to provide additional guidance on this and related legislation and we are following these updates.
We remain available to assist you and your business regarding this and other aspects of your business’ recovery strategy in the wake of the Coronavirus, and if you have any questions, please feel free to email the attorney(s) handling your matter directly, or contact the Firm at firstname.lastname@example.org.