PayCheck Protection Program Flexibility Act Of 2020

The Paycheck Protection Program Flexibility Act of 2020 (H.R. 7010) (hereafter “PPPFA”) was passed by the House and Senate and signed by President Trump on June 5, 2020.

Among other things, the PPPFA: 

  • Extends the Covered Period, the Deadline to Rehire Employees, and the Loan’s Term
    • The covered period (the period in which borrowers must use the loan proceeds for eligible costs to be forgiven) is extended from 8 weeks to 24 weeks after the date a borrower receives the loan proceeds, as long as the covered period does not extend beyond December 31, 2020.  Borrowers who received the loan prior to the bill’s date of enactment may still elect to use either the original 8-week loan forgiveness period or the new 24-week period.
    • The deadline to rehire employees (and thereby limit reduction of the forgivable amount) is extended from June 30, 2020 to December 31, 2020.
    • The term of the loan (for all amounts not forgiven) is extended from 2 years to 5 years and the interest rate remains at 1%.  Loans made earlier than the bill’s date of enactment is allowed to extend to 5 years, if both the lender and borrower mutually agree.
    • Deferring payments of principal, interest, and fees on any PPP loan until the SBA remits the borrower’s loan forgiveness amount to the bank (previously, this period was six months from the loan origination date)
  • Lowers the Percentage of Loan Proceeds that Must be Spent on Payroll Costs
    • The percentage of loan proceeds that a borrower must spend on payroll costs to obtain forgiveness is reduced from 75% to 60%.  A joint statement released on June 8, 2020 from SBA and Treasury clarified that partial loan forgiveness will also be available under the 60% threshold.
    • This increases available funds for other forgivable expenses, such as rent and utility bills.
  • Permits Deferral of Social Security Taxes to Continue Past Loan Forgiveness
    • Borrowers may defer payment of the employer share of social security taxes – even after their PPP loan is forgiven – through December 31, 2020.
    • Deferred amounts remain due in December 2021 (50%) and December 2022 (50%). 

Please note that the above summary information is DRAFT and PRELIMINARY and subject to change without notification as more details become available.  More guidance and clarifications are expected to be issued by the SBA and Treasury. 

The text of H.R. 7010 is available at:

www.congress.gov/bill/116th-congress/house-bill/7010/text

For business or individuals who received the SBA PPP Loan, you may want to discuss with your lender the PPPFA’s impact on your loan. 

If you have not received a PPP loan, there is still over $100 billion in funding available as of June 7, 2020 according to the most recent SBA report.

We will continue to keep you posted as more updates become available.  Should you have any questions or need our guidance or support regarding the PPP Loan under the CARES Act, please do not hesitate to contact our team members or myself at info@erb-us.com