PPP Flexibility Act To Help With Obtaining Loan Forgiveness

The Paycheck Protection Program Flexibility Act of 2020 was signed into law by President Trump on Friday, June 5. It includes significant changes to the SBA’s Paycheck Protection Program (PPP), with more favorable lending terms for retail establishments, restaurants and other businesses. The Act:

  • Allows borrowers to choose to extend the “covered period” during which loan proceeds can be spent from 8 to 24 weeks – until Dec. 31.
  • Removes the limits on loan forgiveness for small businesses that were unable to rehire employees, hire new employees or return to the pre-virus level of business activity.
  • Expands the 25% cap on nonpayroll expenses like rent, mortgage interest and utilities to 40% of the total loan, which lowers the 75% requirement for payroll expenses to 60% to obtain maximum forgiveness.
  • Allows small businesses to receive a PPP loan AND qualify for a separate tax credit to defer payroll taxes; this “double dipping” is currently prohibited.
  • Extends the loan terms for repayment of any unforgiven portions from 2 to 5 years at a 1% interest rate.
  • Allows small businesses additional time to rehire employees or to obtain loan forgiveness if social-distancing guidelines and health-related actions from the CDC or other agencies prevented the business from operating at the capacity it had before March.
  • Extends the period in which a business can apply for loan forgiveness from 6 months to 10 months from the last day of the covered period before it must start repaying interest and principal. PPP loan interest and payment of principal and fees will be deferred until the loan is forgiven by the lender.

The Act includes new exceptions allowing small business borrowers to receive full PPP loan forgiveness even if they do not return to pre-virus staffing levels. Prior guidance allowed exclusion of employees who rejected good faith offers to be rehired at the same hours and wages as before the pandemic. The Act allows borrowers to adjust if unable to find qualified employees or unable to restore business operations to Feb. 15 levels due to COVID-19 related operating restrictions, addressing fears that businesses could not reopen or return to full operations by the 8 week deadline.

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