To keep you informed of COVID-19 relief provisions, legislation has modified a number of rules and regulations of the Paycheck Protection Program (PPP). On Wednesday, June 3, this legislation, now known as the Paycheck Protection Program Flexibility Act of 2020 (the Flex Act), was approved by the Senate. The bill is expected to be signed into law by the President in the near future.
The Flex Act provides several amendments to the PPP in order to allow for more borrower flexibility. Highlights of these changes are as follows:
- Borrowers can now choose to extend the original eight-week “Covered Period” to the earlier of 24 weeks or December 31, 2020. This will provide businesses with significantly more time to bring their employees back to work and use their PPP funds for payroll.
- The payroll cost requirement of 75% has been reduced to 60%. However, as currently written in the law, this change is now a cliff. Borrowers must use at least 60% of their PPP funds for payroll costs, or NONE of the loan will be forgiven.
- The two-year loan term has been extended to five years. This change only applies to PPP loans originated on or after the date on which the Flex Act is signed into law. However, lenders and borrowers are not prohibited from mutually agreeing to modify the maturity date of loans made before that date.
- Loan payments can now be deferred by 10 months after the last day of the Covered Period. Prior to the Flex Act, deferral was available for six months from the date of loan origination.
- The restoration of workforce date has been moved from June 30 to December 31, 2020. This change may provide additional relief to businesses who are unable to rehire employees or who have had to reduce staff in order to comply with directed health measures, such as social distancing.
- Borrowers can now delay payment of their portion of payroll taxes through the end of 2020 to 2021 and 2022.
The SBA currently has approximately $120 billion remaining for PPP loan funding. If your business has been negatively impacted by the coronavirus pandemic and you did not previously apply for a PPP loan but would like to do so now, please contact our office. Our team is available to help you with gathering information for your loan application, as well as provide support and assistance through the forgiveness phase.
As always, we will continue to monitor the status of this and other COVID-19 relief provisions and keep you informed of the latest news and guidelines. Should you have any questions, please contact our office.
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This communication and any applicable contents pertaining to COVID-19 employer relief provisions is based on our professional judgment given the facts provided to us and the COVID-19 employer relief provisions guidance as of the date of the communication. Subsequent developments changing the facts provided to us, or differences in the final guidance and regulations once they are issued, may affect the advice provided. These effects may be material.