On June 5, 2020, the President signed into law the Paycheck Protection Program Flexibility Act of 2020 which makes additional changes to the loan forgiveness requirements under the original SBA Payroll Protection Program Loan. Expect more clarifying regulations over the coming days, and an updated loan forgiveness application is certainly forthcoming. In short, here is how the program has changed (yet again):

  • All borrowers now have 24 weeks to use the loan proceeds, but current borrowers may elect to use the original 8-week period (the “covered period”).
  • Borrowers have 10-months from the end of the covered period to apply for loan forgiveness.
  • Any portion of the PPP loan not eligible for forgiveness, or if the borrower fails to apply for forgiveness within the 10-month period, may be repaid over a 5-year term (increased from the previous version of the law which was a 2-year term).
  • To be eligible for full forgiveness, you must use at least 60% of the loan on payroll costs (down from 75%), and based on comments made by the SBA and Treasury, partial loan forgiveness will be available even if you do not reach the 60% payroll cost threshold.
  • Two new safe harbor exemptions are created.

1)  The first allows loan forgiveness to be calculated without regard to a reduction in full-time equivalent employees, if the employer is able to document:                   

                 i) an inability to rehire individuals who were employed on February 15, 2020, and

                 ii)an inability to hire similarly qualified employees for unfilled positions before December 31, 2020.

2) The second allows loan forgiveness if the borrower, in good faith, is able to document an inability to return to the same level of pre-February 15, 2020, business activity due to compliance required by the CDC, OSHA or the Secretary of Health and Human Services.

  • Borrowers are now able to take advantage of Section 2302 of the CARES Act, which allows companies to defer the payment of payroll taxes.

Stay tuned to the SBA website (which as of June 9, 2020, is not yet updated for the new changes to the law), and do your best to keep up with the constantly changing rules of the Payroll Protection Program Loans.Of course, if you have any questions, please give us a call at (757) 687-8888.