On June 5, 2020, the President signed into law the Paycheck Protection Program Flexibility Act of 2020. The new legislation provides additional assistance to small businesses and relax regulations related to the Paycheck Protection Program (PPP).
Notable changes include:
- The forgiveness period has been extended from 8 weeks to 24 weeks or December 31, 2020 (whichever is earlier). This will give businesses more flexibility in rehiring staff.
- Loan forgiveness requirements have also been relaxed. To receive loan forgiveness, the new rule requires an eligible recipient to use 60 percent of the covered loan amount for payroll costs and may use up to 40 percent for the payment of interest on any covered mortgage, rent, and utilities. This was previously set at 75 percent and 25 percent respectively.
- The term for repayment of any unforgiven portion the loan has been extended from 2 years to 5 years. The interest rate remains at 1%.
- The date by which staffing levels and salary/wage reductions must be restored in order to meet the safe harbor requirements has been extended from June 30, 2020 to December 31, 2020.
- The legislation includes two new exceptions to the requirement that borrowers must restore their FTEs to February 15 levels.
- The first exception is when the borrower cannot find qualified employees for unfilled positions.
- The second exception applies when the borrower cannot restore its operations to comparable levels of business activity due to social distancing, sanitation requirements, or customer safety needs.
For more details of the Paycheck Protection Program Flexibility Act of 2020, please click here.