Congress Enacts PPP Flexibility Act

June 12, 2020

David R. Hostetler, Esq., Director
hos@lex-is.com / 919.442.8593

On June 5, 2020, The Paycheck Protection Plan Flexibility Act (PPPFA) was signed into law, giving PPP loan recipients much more flexibility in how they may use PPP funds, the timeframe within which to do so, and the period in which loans may be paid back or forgiven.

Major provisions include the following:

• Extending from 8 to 24 weeks the period for spending funds, for loan forgiveness purposes;
• Reducing from 75% to 60% the threshold amount of each loan that must be spent on payroll costs, for loan forgiveness purposes;
• Extending the period in which to request loan forgiveness to 10 months from the end of the covered period;
• Increasing flexibility and justification for not rehiring former or alternative full-time workers, based on good faith employer attestations of financial limitations;
• Extending from 2 to 5 years the loan repayment period; loans issued before the new law require that the lender agree to the extension;
• Allowing employers to defer their portion of employee social security tax until after the end of this calendar year, no longer limiting such deferral only until loan forgiveness is granted.

In related news, the Small Business Administration  continued to update its guidance and issued an Interim Final Rule on June 10 (replacing it’s prior interim rule) that included PPPFA clarifications. With the likelihood of more changes and clarifications coming, some experts suggest that loan recipients not prematurely repay their loans or seek loan forgiveness.