Coins in a life-saving device to illustrate PPP loan forgiveness.In April, we shared information with you about how to maximize PPP loan forgiveness. As anticipated, since that time there have been some changes.

On June 3rd, the Senate passed by unanimous consent the Paycheck Protection Program Flexibility Act of 2020, which the House passed the prior week. It now heads to the President for his expected signature.

Here is a link to the entire bill  Paycheck Protection Program Flexibility Act of 2020

Below are some key points of the new legislation:

  • Extends the covered period of forgiveness to the earlier of 24 weeks after funding or December 31, 2020 (instead of 8 weeks).
    • Observation: We are unclear if this means that payroll is now capped at $46,154. per person instead of $15,385. ($100,000 / 52 *24).
  • Reduces the 75 percent payroll requirement to only 60 percent.
    • Observation: This appears to be an all or nothing calculation, meaning that if you only get to 58% payroll spend, there will be no forgiveness, as opposed to it being prorated. The wording now say “ least 60%”
  • Extends the maturity date for loans with remaining balances after application of forgiveness.
    • For any loan made on or after the date of enactment of this new legislation, the amendment calls for a minimum maturity of 5 years (instead of 2 years currently in place).
    • For any existing loans, lenders and borrowers can mutually agree to modify the existing terms
  • Extends the covered period of the entire PPP program until December 31, 2020 (instead of June 30, 2020).
  • Changes the safe harbor for both salary reduction and FTE reduction from June 30 to December 31.
    • Observation: We are unclear if the FTE can be cured any time before Dec 31, 2020 or if you need to have the same headcount on 12/31/20 as you had on 2/15/20. The wording in the CARES Act says “…not later than June 30, 2020, yet the instructions for forgiveness actually asks for the FTE headcount AS OF June 30, 2020
  • Adds an exemption to forgiveness based on employee availability, if the employer meets any of these criteria.
    • Employer is able to document an inability to rehire individuals who were employees on Feb 15, 2020
    • Employer is able to document an inability to hire similarly qualified employees for unfilled positions on or before Dec 31, 2020
    • Employer is able to document an inability to return to the same level of business activity as such business was operating at or before Feb 15, 2020, due to compliance with requirements established or guidelines issued by the Secretary of Health & Human Services, The Director of CDC and Prevention or OSHA during the period March 1, 2020 – Dec 31, 2020, related to the maintenance of standards for sanitation, social distancing, or any other worker or customer safety requirement related to COVID-19
  • Allows business that take the PPP loan to defer the 6.2% employer payroll match (The prior rule was that it limited this deferral to only the period ending at the time the loan was forgiven)
  • Extends the initial deferral period of the loan from 6 months to the date that the amount of forgiveness is remitted to the lender by the SBA
  • Allows borrowers who received their loan prior to the date of enactment of this bill to elect to use 8 weeks as their covered period for forgiveness
  • Requires the borrower to apply for forgiveness within 10 months after the last day of the covered period for forgiveness

All of these items appear to make it easier to spend the monies and have the loan forgiven. There still remain many open questions from the original rules, and more were created with this new legislation. The Treasury and SBA will no doubt issue guidance at some point in the future. As they do we will keep you updated. And, of course, you’re welcome to contact us at any time.

For a summary of changes made to the payroll protection program and what they mean for you read Maximizing PPP Loan Forgiveness – Flexibility Act Updates.