Latest news on PPP – PPP Flexibility Act Provides Favourable Changes to the original PPP terms

The House and Senate have approved the Paycheck Protection Program Flexibility Act of 2020 which amends key provisions of the Paycheck Protection Program established by the CARES Act.

The new Act offers an extension of the original 8 week covered period to 24 weeks for borrowers to use the loan proceeds while retaining the loan forgiveness provisions provided under the PPP. A borrower may forgo the extension and maintain the original 8-week covered period.

Significant changes to note:

• Borrowers have 24 weeks to restore their workforce and wage levels to pre-pandemic levels to be eligible for full loan forgiveness;
  

• The percentage of funds that must be spent on payroll to be eligible for loan forgiveness changed from 75/25 split to 60/40. So now only 60% of the loan amount must be spent on eligible payroll costs.
  

• Two additional exceptions allow borrowers to be eligible for full loan forgiveness even when they don’t fully restore their workforce. The new exceptions include employers who either could not find qualified employees for open positions or who were prevented from restoring business operations to February 15, 2020 levels due to COVID-19 related operating restrictions;
  

• New borrowers will have five years to repay the loan instead of two. The interest rate remains at 1%;
  

• If a borrower fails to apply for forgiveness of a loan within ten months after the last day of the covered period, the borrower will be expected to make payments of principal, interest, and fees beginning on the first day after the ten months;
  

• Business owners with PPP loans are allowed to delay payroll taxes.